Please be gentle with my stupidity. I have been contributing over the years to a traditional IRA. Have not been taking deductions on these contributions (wasn't aware I could) therefore all the money in the IRA since 2014 is post-tax. I also wasn't aware of form 8606 so I am planning to file a bunch of those going back to 2014 to establish the basis. My trad IRA now has about 31K basis and about another 38K in gains. I know I could convert to Roth if I pay taxes on the 38K once the 8606 forms are in. I don't have the extra money right now to pay those taxes however. I cannot roll the trad IRA funds into my 401K because they are post-tax funds and my 401k won't allow it. I would like, however, to be able to do backdoor roth conversion. Am I allowed to open ANOTHER trad IRA account and use that one? I am getting conflicting responses from google. Am I better off just saving money to pay taxes on the conversion someday rather than contributing to backdoor roth at all?
Opening up another traditional IRA would not bypass the pro rata rule. The IRS combines all the accounts for the calculation.
thank you
The gains in your traditional IRA are pretax, so you might be able to roll the gains into the 401k and keep the basis in the traditional IRA. Then you can convert the basis to Roth IRA without paying taxes.
oh interestng, i'll ask fidelity if they allow this
This is a pretty small amount overall. If you can save enough to pay off the tax hit, it’s often easier to pay the tax now and get it over with . Pretty painful to be double taxed but it’ll allow you to do BDRs cleanly going forward
If you're in medicine, then likely you were covered by a workplace retirement plan and your income maybe was in the too high range anyway to be deductible. If that was the case when you were making the Trad IRA contributions you were likely in phase-out, but I don't know your income, filing status or total MAGI (if MFJ applies). You can't withdraw your current basis of Trad IRA post-tax contributions tax free due to pro-rata. That being said, why bother? Just leave it be and let the IRS know that all of your contributions were post tax by filing 8606 for each year.
If you like, open up a new Trad IRA and start contributing to that one going forward if income allows. If not then just put new contributions in a brokerage account (no limits) or Roth IRA if your income allows (single-<153k, MFJ <242k in 2026). The brokerage is what I did in my higher income years. I also took my 401k after leaving jobs and did a couple of rollovers to IRA which I am now slowly converting to Roth IRA in early retirement. Here are the 2026 rules for Trad IRAs:
I had a complicated situation for most of the years I was contributing - was working internationally at a place that had a pension plan for a few years (I made a few thousand over roth limit at the time). they gave me about $20K back at the end, then was a PhD student for a few of the years living off per diem/locums income (during which I used the 20K and could've contributed to Roth but mistakenly thought I made too much and therefore contributed to trad IRA as I didn't know i had any other options for retirement savings), then was trying to contribute extra over what I could contribute to my workplace retirement plan (but was too dumb to know where to put the extra money). In those years I did make too much for roth. So it's a combination of multiple situations and lack of education. What would be the advantages of opening a new trad IRA account as you propose?
Sorry, have to first ask if you meet the criterion currently for deductible IRA contributions? If not then moot point. I am a CFP (left medicine in 2024 after 23 years) and so much of what I do requires lots of data points, and few people ever provide enough for the most accurate answers. Similar to the typical medical patient!
No do not currently meet criteria for deductible IRA contributions
So you max out company plan and put any excess retirement funds in a brokerage account. Your prior error is not that big of a deal, and eventually you will convert it all to Roth when you can cover the taxes on the gains. Never pay the taxes out of the conversion as it defeats the purpose. I pay it out of the dividends in my brokerage
Thank you so much for taking the time to help me sort this out!
Absolutely! Love this kind of stuff. Problem solving while helping folks with their finances is almost as good as helping them in the ER!
no because everything is treated as one for the pro rata rule. yes fix the paperwork on the back end. your 401(k) does not allow rollovers? That would be the cleanest solution. Otherwise at some point you just bite the bullet and convert it and pay the stupid tax which we all have at some point .
thanks. Yes 401K doesn't allow a rollover, they said because it's post-tax money
yes the 401(k) would have to allow non-Roth after tax conversions. Then like I said conversion is the cleanup method. Consider half this year, half next year. But definitely stop doing non-deductible traditional IRA as they are the worst of both worlds.
yes for sure! I can't believe i've been so wrong on this for so long
To add to what Peds was saying. Looks like you’re making 200k+ so even if you convert in the 24% bracket you’re looking at 9k. If you spread that over two years 4500 or so per year it should be easily doable at that income. That would also allow you to start doing the backdoor Roth IRA in January for 2025 and beyond if you start now.
Yes looks like I can do it if I split it over two years- recently took a big pay cut for a job change so don’t have as much extra hanging around as I would like
You are subject to pro rata taxation if you have pretax dollars in ANY ira when you attempt to do the backdoor Roth IRA. You can NOT get around it by simply opening a different ira.
thank you!