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401k Options and Mega-backdoor Roth IRA

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  • 401k Options and Mega-backdoor Roth IRA

    Hello,

    I am currently a resident with 2 more years to go. However, my wife just graduated from residency this year and has started a new job as an employed physician by the hospital. She has been offered a 401k with several options for contribution. She can choose to make Pre-Tax contributions, Roth contributions, and After-Tax contributions.

    We understand that there is an 18k contribution limit combining 401ks throughout the year of 2017. Her prior retirement account during residency was a 401a for which she had a mandatory contribution at 7.5%. She also did a short period of moonlighting and made minor contributions to another 401k.

    We also learned there is now a maximum of 54k contribution for 2017 which includes all employee and employer contributions. Looking at her 401k package details, she is allowed to make 1 in-service withdrawal every quarter, which may make her eligible to make a Mega Backdoor Roth IRA conversion.

     

    Here are some more details about this: http://www.madfientist.com/after-tax-contributions/

     

    Question 1: How much can she contribute to her 401k at her new job and do the prior 401a contributions count towards the limit?

     

    Question 2: If she want to maximize the retirement benefits, should she maximize Pre-Tax contributions or Roth  contributions? Or do some of each? (The thought here being that we are in a lower tax bracket this year compared to where we will be next year)

     

    Question 3: Does she actually qualify for the Mega Backdoor Roth IRA conversion?

     

    We would love to hear any thoughts you may have. Thanks!

     

  • #2
    1) 18K is your max for the year total

    2) pretax probably

    3) if she is able to contribute after tax to the 401a and roll it over to a rIRA then yes.

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    • #3


      Question 1: How much can she contribute to her 401k at her new job and do the prior 401a contributions count towards the limit?   Question 2: If she want to maximize the retirement benefits, should she maximize Pre-Tax contributions or Roth  contributions? Or do some of each? (The thought here being that we are in a lower tax bracket this year compared to where we will be next year)   Question 3: Does she actually qualify for the Mega Backdoor Roth IRA conversion?
      Click to expand...



      1. She can contribute a total of $18k employee contributions across all accounts, whether Roth or traditional 401k contributions. The 401a contributions do not affect the 401k limit but her "minor" contribution to another 401k will.

      2. This is a matter of preference, but your wife is going to have the best of both worlds going forward. She can contribute $18k pretax to the 401k and still put money into a Roth via the NRAT provision (amount depends upon how much the employer match is, but total of all cannot exceed $54k in 2017).

      3. It depends upon the SPD - need to read it carefully to find out when and how she qualifies. Some employers require a year of service before participation, for example.

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

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