3 ms·
I think you may be wrong on point 3. > Furthermore, this section prohibits all employee after-tax contributions in qualified plans and prohibits after-tax IRA
by CincinnatiMan 5y ago
I think you may be wrong on point 3.
> Furthermore, this section prohibits all employee after-tax contributions in qualified plans and prohibits after-tax IRA contributions from being converted to Roth regardless of income level, effective for distributions, transfers, and contributions made after December 31, 2021.
This makes it sound like backdoor will be stopped for everyone, since after-tax contributions to a (Traditional) IRA are a necessary step.
- mariojv 5y agoYou are right, I missed that. This does mean there's an impact on folks making above the Roth income limit but below $400k. Updated the post, thanks
- FooBarBizBazz 5y agoIf this happens, maybe 401k providers will lose business. People often have reasonably large traditional 401ks, which they don't roll over to traditional IRAs, because having traditional IRAs interferes with the backdoor Roth (and they don't want to do a Roth conversion, because that would be a taxable event). But if backdoor Roths went away, then there'd be no reason not to roll a traditional 401k into a traditional IRA. Brokerages like Fidelity and Schwab would win, as people brought their assets over, and 401k providers would lose, since now people would take their money out as soon as they switched jobs.
- paulclinger 5y agoThe rule of 55 (https://www.thebalance.com/what-is-the-rule-of-55-2894280 https://www.thebalance.com/what-is-the-rule-of-55-2894280) may still apply, which relies on a separate 401k balance.
- nullc 5y agoThe 401ks will still enjoy better legal protections in states that don't absolutely protect IRAs.