Announcement

Collapse
No announcement yet.

Couple questions about mega backdoor roth

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Couple questions about mega backdoor roth

    I just started a new part time employment job that I think would allow me to contribute to a mega backdoor roth. I already max out my other retirement accounts including a employer sponsored 401k, a individual 401k(from my 1099 income), backdoor roth IRA and HSA. I have a couple questions about the mega backdoor roth.

    1. I am maxing out my other retirement accounts and have extra income that I normally put in a taxable account. If I now have access to a mega backdoor roth option is contributing to the mega backdoor roth always the better option over a taxable account?

    2. My new employer sponsored 401k is a fidelity plan and allows 3 different ways to contribute (pre-tax, roth or after-tax). I understand pre-tax contribution is the typical contribution where the employee can contribute a max of $19,500. What is the difference between the roth contribution option and the after-tax contribution option? If I am planning this as a mega backdoor roth do I contribute to the after-tax potion and then do a in plan conversion to a roth? or is the "roth" contribution basically that but all in one step?

    3. with my max employee contribution of 19,500 and I think my employer matches 7%. How do I properly allocated the right amount of extra after tax dollars to my plan? I am given the option to allocated a percentage of my salary after tax to contribute to the plan. (I dont want to over fund it and have to pay penalties or something later)

    4. with the contribution options I am allowed to select it seems pretty clear that I can contribute after tax dollars to the plan. I know there is a second step in the mega backdoor roth which involves the need for a in plan conversion to a roth. How do I make sure I can do this conversion prior to comiting to contribute after tax dollars?

    5. When you do the in plan conversion of after tax contributions to a roth. My understanding is you only want to convert the after tax dollars you put in. How do you selectively convert just this amount? Is there a distinction within the plan on which funds are after tax and which funds are pretax and what you want to do with them?

    6. With this bill going around in congress that everyone is worried about getting rid of the ability to contribute to backdoor roths. Should I wait and see what happens with this bill before I make a decision on funding a backdoor roth or not? I dont really want a small amount of money sitting in a extra account that I can no longer contribute to.

    Thank you in advance
    Last edited by Surftrunks; 10-01-2021, 01:00 PM.

  • #2
    5. With this bill going around in congress that everyone is worried about getting rid of the ability to contribute to backdoor roths. Should I wait and see what happens with this bill before I make a decision on funding a backdoor roth or not? I dont really want a small amount of money sitting in a extra account that I can no longer contribute to.

    Note: This is really 6.

    Timing, this may disappear in 2022. Use it in 2021 as long as it is available.

    Comment


    • #3
      4. Ask to see the SPD, summary plan description. If MBDR is allowed, this will inform you of the necessary steps. Specifically you should be allowed to have either in-service withdrawals with rollover to your Roth IRA or in-plan Roth rollover (IRR) with the after-tax contribution ending up in the Roth 401k portion of your plan. If neither of these options is specified, then you’re only allowed to make after-tax contributions. Earnings from the after-tax basis will be taxable and you probably won’t be able to remove either until you separate from the company. I wouldn’t do it unless MBDR is specifically allowed and can be completed by 12/31/21. This addresses your concern in 6 if Congress does pass a bill disallowing after-tax Roth conversions.

      Comment

      Working...
      X