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Is there another term besides mega backdoor? We switched retirement providers and I will have access to Roth and Traditional 401k space. I’m curious if there’s other language to describe it I should look for when I read their docs, or if the retirement management company would call it that.
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Jan 6, 2023 00:50
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| # ? May 27, 2024 08:37 |
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Mine at Fidelity calls it Roth In Plan Conversion (RIPC). You will also need to be able to contribute money as Aftertax (or some other term, as opposed to Traditional or Roth). If you don't have 3 options you probably don't have it. Also for being sure to get the all the match, get to 90% of the cap at normal speed, dribble the next X-1 paychecks in, and then the last one crank it back up to 50% or whatever. This applies pretty equally if your cap is the regular 22.5k or the mega 66k.
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Jan 6, 2023 00:55
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ROJO posted:Yeah, Fidelity will cut you off at the $61k cap, but you have to micromanage your contributions as you get close to end of year. I cut down to the minimum to get my full company match in October and it looks like I wound up missing maybe $100 of company match or so because I hit the aggregate limit on the last paycheck. Annoying, but I don't really know how it could be done otherwise, especially if you get bonuses, etc. All employer payroll systems should be set up to run bonuses as separate checks and not deduct poo poo like health insurance, HSA/FSA, and retirement contributions. This is straightforward and standard config in any payroll software.
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Jan 6, 2023 01:21
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When I had a Fidelity 401k which allowed the mega back door, it let me over contribute, but the issue was the true up of employer contributions at the end of the year. So they “clawed back” some contributions equal to the amount of the employer contribution true up.
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Jan 6, 2023 03:07
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Brain Curry posted:Is there another term besides mega backdoor? We switched retirement providers and I will have access to Roth and Traditional 401k space. I’m curious if there’s other language to describe it I should look for when I read their docs, or if the retirement management company would call it that. Mine refers to them as "after tax contributions" and "in plan conversions", to distinguish from just a typical Roth contribution.
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Jan 6, 2023 03:09
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KYOON GRIFFEY JR posted:All employer payroll systems should be set up to run bonuses as separate checks and not deduct poo poo like health insurance, HSA/FSA, and retirement contributions. This is straightforward and standard config in any payroll software. My employer absolutely made 401k contributions for my retention incentive payout and management incentive plan (our equivalent of a yearly bonus), two things I either didn't know we're happening on Jan 1 (former) or couldn't have predicted the size of (latter). Can't speak to other stuff because all our medical is with my wife's job. I would have to go back and look to see if I made contributions off them, but I definitely got the 10% match from my employer on those two items. ROJO fucked around with this message at 03:15 on Jan 6, 2023 |
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Jan 6, 2023 03:12
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Oh it definitely happens, but it's stupid and lazy and lovely imo. You plan retirement savings off of money you know you are going to get.
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Jan 6, 2023 03:15
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KYOON GRIFFEY JR posted:Oh it definitely happens, but it's stupid and lazy and lovely imo. You plan retirement savings off of money you know you are going to get. Agreed. That is how it works where i work.
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Jan 6, 2023 05:18
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I've definitely had 401k contributions deducted from bonus checks at multiple jobs including current, but not stuff like health insurance or other benefits with fixed costs. Doesn't really matter since I max it out and a dollar is a dollar at the end of the year, but for the love of god someone fix 401k contributions to work in dollar amounts not percentages. Every company I've ever worked has limited 401k contribution to whole-integer percentages only.
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Jan 6, 2023 06:24
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Guinness posted:Doesn't really matter since I max it out and a dollar is a dollar at the end of the year, but for the love of god someone fix 401k contributions to work in dollar amounts not percentages. Every company I've ever worked has limited 401k contribution to whole-integer percentages only. Is it just some lame-rear end attempt to get people to save, on the theory that actually having to commit to a real dollar amount would otherwise dissuade them from doing so? Is it tied in with the nonsense about automatically increasing the percentage year-after-year? I don't understand, and it bothers me.
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Jan 6, 2023 06:52
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Ersatz posted:I've never understood why it's in percentages instead of dollars to begin with. Who benefits from that, and how? My 457 defaults to dollars per paycheck, but has the option for percentages.
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Jan 6, 2023 07:04
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Ersatz posted:I've never understood why it's in percentages instead of dollars to begin with. Who benefits from that, and how? I turned this over in my mind a couple of times and was first thinking well, lots of other payroll deductions are expressed as percentages (OASDI, HI, fed income, state income, etc), but on the other hand stuff like insurance is in dollar amounts, so that can't be it. It's probably a mix of lovely software and lovely implementations and people not caring.
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Jan 6, 2023 14:46
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My employer's 401k has a toggle to switch to after tax contributions automatically after hitting the trad/Roth limit, as well as a separate contribution election for bonus checks, so it is possible to put it on autopilot. Not sure what happens when you hit the mega backdoor limit though. There are enough jumbo salary people here that I'm sure they have to deal with that each year and have procedures for it. My only gripe is that the in-plan Roth conversions are manual and only 6 times per year.
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Jan 6, 2023 15:15
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I maxed my IRA and did backdoor roth at the start of the year, but apparently because I hit "Convert all" instead of entering a $ amount, vanguard decided that it would apply interest after I hit convert but before they converted, then include that amount in the conversion. So I'm now $0.75 over the max contribution for my IRA now.  I guess I just carry it forward and pay the 6% on $0.75, but what the hell Vanguard. E: wait I think I'm mixing up tax stuff on IRA contributions I haven't had my coffee yet, but still not what I would have expected from me doing that. surc fucked around with this message at 15:59 on Jan 6, 2023 |
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Jan 6, 2023 15:56
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surc posted:I maxed my IRA and did backdoor roth at the start of the year, but apparently because I hit "Convert all" instead of entering a $ amount, vanguard decided that it would apply interest after I hit convert but before they converted, then include that amount in the conversion. So I'm now $0.75 over the max contribution for my IRA now. Looks like it logged it as a dividend the same moment the conversion happened, but the contributions still list $6500 and don't indicate an excessive contribution. UncleGuito fucked around with this message at 17:11 on Jan 6, 2023 |
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Jan 6, 2023 16:45
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surc posted:I maxed my IRA and did backdoor roth at the start of the year, but apparently because I hit "Convert all" instead of entering a $ amount, vanguard decided that it would apply interest after I hit convert but before they converted, then include that amount in the conversion. So I'm now $0.75 over the max contribution for my IRA now. Nah you're fine. Vanguard won't let you overcontribute. You contributed the max to a Traditional IRA which you won't be able to deduct. And then you converted it all to Roth. There is no limit on what you can convert. You had $0.75 of interest. So you that will be the earnings that you pay taxes on. So your taxable amount from the conversion will be $0.75, no additional 6% penalty needs to be paid.
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Jan 6, 2023 17:50
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Ersatz posted:I've never understood why it's in percentages instead of dollars to begin with. Who benefits from that, and how?
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Jan 6, 2023 18:52
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Ersatz posted:I've never understood why it's in percentages instead of dollars to begin with. Who benefits from that, and how? I expect the majority of people out there are mostly concerned about hitting their employer match (if that) and since those are typically percentages of your income it matches up well. I imagine the amount of people who get close to maxing even the standard limits are an amazingly small amount of the total working folks out there. My employer added the ability to set it by in dollars per paycheck last year and when I mentioned this to a few people on my team absolutely nobody acted like they cared at all... *shrug*
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Jan 6, 2023 19:00
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The match almost always being in % terms makes sense and would make % allocations more helpful. I also think it's good for retirement savings to forcibly scale with income increases. If you care a lot about saving for retirement you are likely to adjust this upward on your own, but if you don't it gives a bit of a tail-wind.
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Jan 6, 2023 19:55
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KYOON GRIFFEY JR posted:I also think it's good for retirement savings to forcibly scale with income increases. If you care a lot about saving for retirement you are likely to adjust this upward on your own, but if you don't it gives a bit of a tail-wind.
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Jan 6, 2023 20:33
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Ersatz posted:Given the system we have, forced scaling may be a necessary bit of social engineering, but for those of us who are both fortunate enough to be able to max contributions year-after-year, and already inclined to do so, it would be nice to be able to just specify dollar amounts. Or even better, to be able to select an option specifying automatic maximization each year, accounting for whatever Congress does to the limit. The fact that this isn't an easily accessible option with custodians as large and popular as Fidelity tells you just how big of a percentage of the market people who can max a 401(k) consists of. And that's not a surprise considering the parade of "average amount saved for retirement" articles.
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Jan 6, 2023 20:41
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Ersatz posted:I've never understood why it's in percentages instead of dollars to begin with. Who benefits from that, and how? My company recently switched to requiring %ages instead of fixed dollar amounts and the rationale was to make it easier to have a default, non-zero value for contributing for employees. Seems reasonable, but unsure why we can't have both ¯\_(ツ)_/¯.
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Jan 6, 2023 21:17
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My wife has a max setting for her 403b, which is really convenient. I can only set a dollar amount/percentage for my 401k, but it's not directly connected to payroll so it doesn't automatically do anything... it just triggers an email to HR to make a manual change.
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Jan 7, 2023 00:29
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UncleGuito posted:Looks like it logged it as a dividend the same moment the conversion happened, but the contributions still list $6500 and don't indicate an excessive contribution. 80k posted:Nah you're fine. Vanguard won't let you overcontribute. You contributed the max to a Traditional IRA which you won't be able to deduct. And then you converted it all to Roth. There is no limit on what you can convert. You had $0.75 of interest. So you that will be the earnings that you pay taxes on. So your taxable amount from the conversion will be $0.75, no additional 6% penalty needs to be paid. Thanks, yeah, this is what I was realizing with my edit as I caffeinated. Either way it wouldn't have been an actual problem, at worst just wasting a few minutes on forms at tax time, just would not have expected "convert it all" to include interest applied after I submitted the conversion. Glad I ran into it on $0.75 rather than on real money I guess.
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Jan 7, 2023 02:08
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surc posted:Thanks, yeah, this is what I was realizing with my edit as I caffeinated. Either way it wouldn't have been an actual problem, at worst just wasting a few minutes on forms at tax time, just would not have expected "convert it all" to include interest applied after I submitted the conversion. Glad I ran into it on $0.75 rather than on real money I guess. they give zero poo poo about taxing your $1 of gains. I wouldn't even bother reporting it personally.
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Jan 7, 2023 02:10
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spwrozek posted:they give zero poo poo about taxing your $1 of gains. I wouldn't even bother reporting it personally. You still have to enter the 1099-R correctly anyway so it’s not a matter of reporting $1 but a matter of reporting a $6001 with a $1 taxable amount. The IRS definitely gives a poo poo that that is done correctly.
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Jan 7, 2023 02:50
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spwrozek posted:they give zero poo poo about taxing your $1 of gains. I wouldn't even bother reporting it personally. Eh, if there's a tax form sent that includes an interest amount I report that amount even if it's below the minimum taxable. It's generally quick and straight-forward and if I ever have issues with the IRS in my life I would like any previous records they pull up to be squeaky clean. I might feel differently if it wasn't such a nothing amount of effort but  surc fucked around with this message at 02:53 on Jan 7, 2023 |
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Jan 7, 2023 02:50
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You will not get a 1099-R for interest less than $10. For your 8606 you are already filling out the form so 6001/6000 is not a big deal at all. This will be all on your 1099R for your conversion. spwrozek fucked around with this message at 06:51 on Jan 7, 2023 |
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Jan 7, 2023 06:39
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surc posted:Eh, if there's a tax form sent that includes an interest amount I report that amount even if it's below the minimum taxable. It's generally quick and straight-forward and if I ever have issues with the IRS in my life I would like any previous records they pull up to be squeaky clean. I might feel differently if it wasn't such a nothing amount of effort but When my uncle died and I was beneficiary of his life insurance, they ended up sending me a 1099 for, IIRC, the interest the insurance payment made before I claimed it (I don't remember how much, but I think it was less than $20 with no withholdings). Of course when I went to file my taxes I had completely forgotten about the form sitting in my files for a few months and ended up submitting without it. I realized it that night and started slapping myself. Tried to amend the return but Turbotax said I had to wait. I had all of 3 1099 forms that year, and the IRS had (as I understand the process) copies of them all, so I figured they'd take one look at a return with only 2 and go "what the hell is this guy trying to pull? REJECTED!". Maybe I'd get audited for my boneheaded mistake. I waited nervously and... nope, they just accepted the return and didn't say anything. I don't recommend actually doing that because honestly a dollar or two difference in taxes isn't worth the nerves, but they didn't seem to think it was a big deal. Bremen fucked around with this message at 19:58 on Jan 7, 2023 |
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Jan 7, 2023 17:06
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spwrozek posted:You will not get a 1099-R for interest less than $10. The point is that the OP will not get a 1099-R for interest for any amount, less than $10 or more than $10. He will get a 1099-R showing a $6001 distribution (not interest) for the conversion. And then he will have to go through the process of declaring a basis of $6000 later on in the tax software. At no point does the idea of not reporting the $1 even come up, because it would take more effort to not declare it, because you must declare whatever distribution he sees in the 1099-R and do the later basis part correctly. He will end up with $1 taxable amount. There was never a $1 to "not bother reporting" in the first place, and it would be literally incorrect to report $1 of interest at any point in the process.
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Jan 7, 2023 18:19
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That's fine. He was freaking out about $1. On a from he already had to fill out. Zero extra work.
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Jan 7, 2023 18:23
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lol quote me the part where I freak out. The point was vanguard behaved in a way I hadn't expected it to, which I thought would result in negligible work, which it turns out it won't even. It was the weird behavior that I wouldn't have expected given the way they structure their UI and write their stuff up that I was commenting on. Not whatever impact 75 cents might have.
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Jan 7, 2023 18:29
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Tax form chat and IRS stories are both more interesting and informative to most people than vanguard's bad UI though so like don't let that stop it
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Jan 7, 2023 18:44
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Brain Curry posted:Is there another term besides mega backdoor? We switched retirement providers and I will have access to Roth and Traditional 401k space. I’m curious if there’s other language to describe it I should look for when I read their docs, or if the retirement management company would call it that. We have Principal Financial (who bought out Wells Fargo Retirement) and they call it Super Roth. It’s a checkbox in the after-tax election section.
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Jan 8, 2023 01:18
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Subvisual Haze posted:Mine refers to them as "after tax contributions" and "in plan conversions", to distinguish from just a typical Roth contribution. My plan administered by Schwab has similar wording: "After Tax Account" and an on/off Google for "Automatic In-Plan Roth Rollover". All continuing toes can be done in $ amounts or % amounts, and the former is obviously very convenient to get right to the limits regardless of changes to base pay through the year. If you choose a percentage-based contribution value, you can also set it to automatically increase by x% each year on a particular date until it hits a target percentage you also set. It's pretty flexible!
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Jan 8, 2023 03:03
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Did a Roth IRA backdoor for the first time this year, and I'm a little concerned the way it look on my Contributions page on Vanguard: There is only 6500 more in the Roth and nothing left in the Traditional, but just wanted to check.
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Jan 8, 2023 15:40
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An informative thread on the topic of who is more likely to get audited: https://twitter.com/MorePerfectUS/status/1611806555137282048?t=h6n3LXOM1D1qCm7tZR4ctA&s=19
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Jan 8, 2023 16:42
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Xenoborg posted:Did a Roth IRA backdoor for the first time this year, and I'm a little concerned the way it look on my Contributions page on Vanguard: That's what mine looks like.
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Jan 8, 2023 17:01
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My 401K through work (which is T. Rowe Price) added the option for a Roth 401K this year, as well as the ability to roll over roth savings. However I can't find any way to make after-tax contributions, so I guess mega backdoor is still out, huh?  Related: What does everyone think of pre-tax vs Roth 401K contributions. I've only ever had the option for Pre-tax, but I hear a lot of talk about how Roth is better through various people and sources. Reading up on it, it seems like the real answer depends entirely on what taxes do in the future, and how I personally grow in my career in the future. I'm not sure what is the safest assumption to make on either is. I assume taxes will eventually go up as Boomers die and things have to be paid for by our society, and I believe my salary will grow a bit for the next decade at least. SpartanIvy fucked around with this message at 17:37 on Jan 8, 2023 |
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Jan 8, 2023 17:34
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| # ? May 27, 2024 08:37 |
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I tend to do pretax on my 401k these days (mid 30s) since I think I'll be in a lower bracket when I retire. My IRA is Roth though (backdoor) so I guess that diversifies things a bit.
UncleGuito fucked around with this message at 19:47 on Jan 8, 2023 |
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Jan 8, 2023 17:41
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