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  • #46
    Originally posted by SLC OB View Post
    So... my company only allows me to put up to 10% of my earnings into 401a, which I then flip to Roth (MegaBackDoor Roth). However, I can only flip once a year. Any suggestions on starting that this Jan 2022?
    I will (and have already transferred $$$ to Fidelity) do the backdoor Roth on Jan 3rd but do not want post-tax $$$ stuck in 401a if in fact congress bans the MBDR. Thoughts? Wish I could transfer more than once a year... I would just do it monthly so that I got the money out of there...
    Since there is no guarantee that the Dems can agree on enough to pass some form of the BBB in 2022 I plan to do all the BDR conversions allowed, including the Mega. If they actually pass something that disallows Roth conversions of after-tax contributions will it be retroactive to 1/1/22? Or would there be some out, like delaying the start date till 1/1/23? I’m willing to chance there will some kind of provision for 2022 after-tax contributions to still be Roth converted. But if I’m wrong, why not make the 2022 after-tax contributions part of your bond allocation? It can be the first account accessed during the spend down phase without being penalized since bond earnings are taxed as income anyways.

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    • #47
      i haven't followed the legislative debate super closely but from what i have it seems like this is far from imminent and making it retroactive would be a super unpopular side dish to a main course that's already pretty unpopular.

      i think i'm going to do it.

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      • #48
        I’m ready for it. Already moved 6000 from my bank to the settlement fund at vanguard. Going into trad IRA on Jan 3! One the few times in my life I’m happy that Congress moves so slowly.

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        • #49
          Originally posted by ImpalerMD View Post
          I’m ready for it. Already moved 6000 from my bank to the settlement fund at vanguard. Going into trad IRA on Jan 3! One the few times in my life I’m happy that Congress moves so slowly.
          I'm always happy when congress moves slowly. Any legislation passed quickly is a generally bad idea. In fact, I'm usually happiest when Congress gets little done no matter which party is in power. When the media talking heads say; "this is a Do Nothing Congress", I'm ecstatic!

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          • #50
            Originally posted by GasFIRE View Post
            Since there is no guarantee that the Dems can agree on enough to pass some form of the BBB in 2022 I plan to do all the BDR conversions allowed, including the Mega. If they actually pass something that disallows Roth conversions of after-tax contributions will it be retroactive to 1/1/22? Or would there be some out, like delaying the start date till 1/1/23? I’m willing to chance there will some kind of provision for 2022 after-tax contributions to still be Roth converted. But if I’m wrong, why not make the 2022 after-tax contributions part of your bond allocation? It can be the first account accessed during the spend down phase without being penalized since bond earnings are taxed as income anyways.
            My *understanding* (which is fairly limited since I have always flipped this $$ to Roth) is that the 401a post-tax gains is taxed at regular income tax (not long term capital gains) which is why I would rather just have that $$ in taxable account. I guess it is not the end of the world. Last year, I was able to contribute my max to 401a by April... so I will try to do that and flip it all before May. Hopefully nothing will happen before then.

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            • #51
              Originally posted by SLC OB View Post
              My *understanding* (which is fairly limited since I have always flipped this $$ to Roth) is that the 401a post-tax gains is taxed at regular income tax (not long term capital gains) which is why I would rather just have that $$ in taxable account. I guess it is not the end of the world. Last year, I was able to contribute my max to 401a by April... so I will try to do that and flip it all before May. Hopefully nothing will happen before then.
              There are two types of employee contribution types in a 401a plan:
              1. Pre-tax mandatory* contributions are similar* to employee deferrals.
              2. After-tax employee contributions with an in-plan Roth rollover (IRR and/or an in-service rollover) support the MBDR. Any regular income tax on any earnings before rollover is dwarfed by the tax savings of decades of Roth tax free earnings/qualified distributions. Why would you possibly rather pay capital gains on all earnings than have them tax-free?
              *Mandatory is a bit of a misnomer. You have a one time option to select pre-tax employee contributions. Only after the selection period is over do they become mandatory. While they are contributed by salary reduction and tax-deferred until taxable at ordinary income tax rates at distribution. They are no consider employee deferrals and are not included in the employee deferral limit.

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              • #52
                Originally posted by spiritrider View Post
                There are two types of employee contribution types in a 401a plan:
                1. Pre-tax mandatory* contributions are similar* to employee deferrals.
                2. After-tax employee contributions with an in-plan Roth rollover (IRR and/or an in-service rollover) support the MBDR. Any regular income tax on any earnings before rollover is dwarfed by the tax savings of decades of Roth tax free earnings/qualified distributions. Why would you possibly rather pay capital gains on all earnings than have them tax-free?
                *Mandatory is a bit of a misnomer. You have a one time option to select pre-tax employee contributions. Only after the selection period is over do they become mandatory. While they are contributed by salary reduction and tax-deferred until taxable at ordinary income tax rates at distribution. They are no consider employee deferrals and are not included in the employee deferral limit.
                No, my concern was if I contributed to the 401a post-tax and did not roll it into my Roth before the government takes that option away from me (see my first post... I was replying to GasFIRE). Then I would have post-tax dollars in the 401a, where I would rather have them in the taxable, right? I was reading a different post (a while back, when this BBB first came out) and people were discussing contributing to the post-tax 401a options vs taxable... sounded like everyone recommended taxable at that point (if the MBDR goes away).

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                • #53
                  Originally posted by ImpalerMD View Post
                  I’m ready for it. Already moved 6000 from my bank to the settlement fund at vanguard. Going into trad IRA on Jan 3! One the few times in my life I’m happy that Congress moves so slowly.
                  Curious! Can it be done on 1st Jan, the Saturday ?

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                  • #54
                    Just like any other action on a non-business day. You can initiate it, but it still wouldn't be effective until the next business day. In this case Monday 1/3.

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                    • #55
                      I like the idea of queuing up funds in brokerage account beforehand so that you can transfer to TIRA on 1/1 (or 1/3). Then you don't have to wait 3-5 days for ACH to clear, and Roth conversion process can be initiated pretty quickly. It doesn't really matter in the long run but good for those who want to expedite/"get it out of the way."

                      Edit: This assumes your taxable, TIRA, and Roth are at the same brokerage.

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                      • #56
                        So, now that no new legislation has passed so far prohibiting it, how many here have completed the 2022 BD Roth.

                        I have done that in the 1st week and 14K is now invested in Schwab 500. Let us see if they prohibit it in future legislation.

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                        • #57
                          Originally posted by Kamban View Post
                          So, now that no new legislation has passed so far prohibiting it, how many here have completed the 2022 BD Roth.

                          I have done that in the 1st week and 14K is now invested in Schwab 500. Let us see if they prohibit it in future legislation.
                          Mine was deposited, converted, invested by Jan 7...a record time for me.

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                          • #58
                            I dropped mine in last week. I highly doubt there will be any retroactive actions. Squeezing a few more roth dollars in before it is cancelled because most of my savings are pretax.

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                            • #59
                              mine was done last week. I will likely put off doing the MBDRoth for 2021 until February.

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                              • #60
                                I'll probably be doing mine in mid-February.

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