36 years old earning $215k. A few years ago, I contributed to a Traditional IRA for two years (currently about $19k total) using after-tax money but did not convert to Roth. At the time, I didn’t fully understand the pro-rata rule or the mechanics of the backdoor Roth, so this was due to inexperience rather than intentional planning.
I also have a rollover IRA of about $205k from an old employer’s 401(k), which is fully pre-tax. I now understand that this setup prevents clean standard backdoor Roth IRA contributions unless I do some cleanup.
My current employer just added after-tax 401(k) contributions with automatic in-plan Roth conversion (Mega Backdoor Roth). I plan to contribute to this going forward, which should give me meaningful Roth exposure without involving IRAs or the pro-rata rule.
My main question is, given this setup, what is the most sensible way to handle my existing IRAs?
Is it worth doing the work to clear the IRA decks in order to enable standard backdoor Roth IRAs? My understanding is that this would likely involve rolling the rollover IRA into my current employer’s 401(k) and then deciding what to do with the ~$19k Traditional IRA with after-tax basis, though I’m not entirely clear on the mechanics or tax implications.
I’m also mindful that once I start contributing to the Mega Backdoor Roth, I may not have sufficient cash flow to also fund a standard backdoor Roth (two young kids and high childcare costs), which makes me question whether the cleanup effort is worthwhile at all.
Curious how others would approach managing these two IRAs now that the Mega Backdoor Roth is available.
**Edit** Wow, thanks everyone! I appreciate the thoughtful explanations and different perspectives. Continually impressed by the folks on this sub