I want to start making backdoor Roth contributions, but I already have $200K in a traditional IRA. My income is $300K, so converting the $200K to a Roth IRA would result in a big tax bill. I’m 50 years old and wondering if it’s worth doing this for the next 10 years of backdoor contributions. What do you all think?
Do you have an employer plan like a 401(k) or 403(b) that would let you roll your existing IRA funds into it?
Kai said:
Do you have an employer plan like a 401(k) or 403(b) that would let you roll your existing IRA funds into it?
That would be the easiest solution. A reverse rollover into your employer’s 401(k) would clear out your IRA and make backdoor Roth contributions much simpler.
At your age, paying 35% federal tax (plus state taxes, if any) doesn’t seem worth it for the conversion.
Do you expect to have significant taxable income in retirement? If not, converting to Roth now might not be worth it due to the high tax hit. If you have a 401(k) at work, rolling your traditional IRA into it would let you avoid the pro-rata rule and still do backdoor Roth contributions.
By the way, Roth isn’t an acronym! When you write ROTH, it just looks like you’re yelling his name. 
You’re so close to retirement that I’d probably just leave it as is.
Roth money could grow 4x over 20 years. If you convert now, you pay tax only on the contributions. If you don’t convert, you’ll pay tax on both the contributions and all the growth.
If your 401(k) accepts rollovers, transfer the $200K there. This avoids the pro-rata rule and lets you start backdoor Roth contributions without the tax hit.
If a rollover isn’t an option, consider converting to Roth gradually over several years. By spreading out the conversion, you can stay within your current tax bracket and reduce the immediate tax burden. Once the traditional IRA is cleared, backdoor Roth contributions will be easier.
It might be worth waiting until you stop working. Your tax rate could drop a lot then, and converting will be cheaper. I spread my conversions over 5 years after I was laid off, using savings and capital gains to live on. It worked well for me.
Converting $200K into a Roth IRA could pay off in the long run, but it’s a big upfront tax hit. With your $300K income, adding $200K pushes you into the highest tax bracket (37% federal plus state taxes). It could also make 85% of your Social Security taxable later.
If you have 10+ years for the Roth to grow tax-free and expect a high tax bracket in retirement, it might still be worth it. To soften the tax blow, consider spreading the conversion over several years. This would also let you do backdoor Roth contributions without the pro-rata rule.
I’d recommend talking to a CPA to run the numbers and see if this fits your retirement goals.