In this video we’re answering the question “What happens if you break the Pro-Rata Rule when doing a Backdoor Roth IRA?” The White Coat Investor wants to help you stop doing dumb things with your money, so in this video series we answer questions you have submitted.
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00:00 What happens if you break the Pro-Rata Rule when doing a Backdoor Roth IRA?
00:50 How does the Pro-Rata rule work?…(read more)
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Thanks for posting this video! I have a situation where I made a $12,000(for the years 2021 as well as 2022) non-deductible contribution to a traditional IRA, but waited a few weeks to make the transfer to my Roth IRA and have since earned $0.18 in dividend; therefore the total balance in my traditional IRA is now $12,000.18. At this point can I transfer the entire amount into my Roth IRA or can I only transfer $12,000? What are the options I have here? What should I do about the $0.18? If I can only transfer the $12,000 how does the pro-rata rule impact me for the small amount left? Appreciate any help!
Is it possible to leave a Rollover IRA with existing funds alone. Create a Traditional IRA to contribute with non deductible funds and convert only this account to a Roth. Would this avoid the Pro Rata rule?
I am trying to clean up my pro-rata mess right now. Right now, my traditional IRA has ~$50,000 in pre and post tax funds. Before I realized my mistake, I had already made a 2022 non-deductible contribution of $6000 to that IRA, but I have NOT converted that yet. Is that a problem? I ask because you mention in your video that you must first zero out your IRA balance before contributing to it. Does it have to be in that sequence?