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Another option may be to see if you can roll the rollover IRA into your Trad 401k. That will allow you to still do the backdoor without pro-rata impacts
Continued -
I switched jobs in June so for simplicity assuming 6 months each.
50k + 10k + 80k + 15k with some capital gains putting me very close to the 32% bracket (~165k).
Would you still transfer the 37k to Roth, why or why not?
If you have this rollover traditional funds, that means you can't do a backdoor Roth IRA?
That is what I did. Rolled my tIRA into my 401k.
I wish I had just paid the taxes as it was less than $5k I believe, but I was dealing with undergrad, grad, car loans and a new mortgage. If I knew my financial situation would be 1-2 years later, would have just paid the taxes.
Mentor
How old are you? If you are young you may still want to get that money into a Roth but I don’t think I’d do it at the cost of pushing into a higher tax bracket.
You can potentially spread it over a year or two though increasing income may be a problem there. Also, remember to figure out your AGI. Without looking at the tax tables myself, you may not be as close as you think if you are maxing out a traditional 401k.
Mentor
There is no penalty for a Roth conversion. I wouldn’t say it’s a no brainer at 24%. Depends on your target FIRE age, expected retirement income, and how you think tax brackets may change in the future.
I’m going for a bigger FIRE number than many so I’ll be working a bit longer and would likely do it. My wife’s company nixed their pension a few years back and we took the tax hit from moving the payout into a Roth. If you are looking to FIRE young and keep expenses super low, you may not come out ahead.