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after tax 401k rolled into a roth the next year?

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  • after tax 401k rolled into a roth the next year?

    Ok guys and gals, I could use some clarification here. I am a new hire at KP in Hawaii. In the orientation today, they mentioned that other than your annual salary deferral limit (18,000-which I have already maxed at my old job) you can now add up to 54000 dollars after tax contribution. This is 36 G. But what she said at the end, did not make any sense to me. I asked her to clarify and she said the same thing again:

    In the following year, I can roll this 36 thousand into a Roth IRA, because I have paid the taxes on it already.

    Is this the Mega Roth everyone hints at, and, does the back door Roth I have already put away for this year (5500) need to be plugged into the 54000 equation? She did not know.

     

    TIA.

    PS. Also, my previous job had profit sharing which added 13500 to my account in March, as well as, matching for my contribution which was about 7200. So my question is, do I get to contribute 54,000-18,000 or I have to subtract all the additional money that was added to my account by my previous employer? Mahalo!

     

  • #2

    • Yes, this is the Mega Roth and no, your backdoor Roth does not have to be plugged into the equation. The backdoor is an "individual" account limit which does not affect the "employer" retirement account limit.

    • You do not have to count the matches or profit sharing at your other job against your contributions for your new job unless you participated in a 403b.

    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3




      • Yes, this is the Mega Roth and no, your backdoor Roth does not have to be plugged into the equation. The backdoor is an “individual” account limit which does not affect the “employer” retirement account limit.

      • You do not have to count the matches or profit sharing at your other job against your contributions for your new job unless you participated in a 403b.


      Click to expand...


      what is the benefit to organizations for offering mega roth?

      thanks

       

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      • #4


        what is the benefit to organizations for offering mega roth? thanks
        Click to expand...


        Happier employees? HCE employees with multiples of current contributions going into their Roth accounts?

        I think the real question is "what is the downside to organizations..." I cannot think of any as long as a plan is already in place. imo, the reason more org's don't offer them is simply lack of knowledge.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          How do you roll into a Roth next year?

          54 000 is called "non-Roth post-tax" money. Are we talking the employer-offered Roth or your personal Roth? I guess it's the first one, as the personal one has the 5500 limit?

          Thank you.

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          • #6
            So, some companies still make you pay taxes on the amount you have earned at the same rate of your income tax. This plan is tax free. You roll over in January. So in essence, you can put away 5500 plus 36000 of roth yearly.

            Not too shabby. I did not know companies did this.

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            • #7




              So, some companies still make you pay taxes on the amount you have earned at the same rate of your income tax. This plan is tax free. You roll over in January. So in essence, you can put away 5500 plus 36000 of roth yearly.

              Not too shabby. I did not know companies did this.
              Click to expand...


              If the after tax contributions had some growth before you roll over to the Roth IRA, you will owe taxes on the gains, right Johanna? Some plans let you roll over more than once a year, I believe NorCal KP lets you do that.

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              • #8


                If the after tax contributions had some growth before you roll over to the Roth IRA, you will owe taxes on the gains, right Johanna? Some plans let you roll over more than once a year, I believe NorCal KP lets you do that.
                Click to expand...


                Yes, that is correct. Being able to r/o at all is a perk. Some plans allow NRATs but not the in-service r/o to a Roth.
                Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #9





                  Click to expand…


                  If the after tax contributions had some growth before you roll over to the Roth IRA, you will owe taxes on the gains, right Johanna? Some plans let you roll over more than once a year, I believe NorCal KP lets you do that.
                  Click to expand...


                  TPMG doc here. Miss Bonnie is correct.  Here in NorCal, we are allowed to make a conversion of any after tax 401k contributions into Roth $ once per quarter. Doing this more frequently keeps the gains pretty low (since the after tax 401k gets emptied relatively quickly). I didn't convert mine into my Roth IRA but left it as part of my Roth 401k (though either option was available). As of now, it can't be done online but the Fidelity reps have gotten more familiar with the process over the past couple of years. The last time I did this, the call took all of 2 minutes.

                  Best,

                  WW

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