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I have used this for the past few years with my company 401(k) / Roth IRA hosted at Vanguard. As of 2014, you can do it online (key phrase being "in-service distribution to Roth IRA"). I have most of my bonus and 20% of each paycheck go after tax and put in the distribution orders on the Saturday after Friday payday. Tax-wise it looks a little messy if you read the forms but TurboTax was able to handle it fine (there's a "taxable amount" labeled on the conversion 1099R form which should be near 0 in TurboTax once you're done answering questions). The only other issue I've run into with this is that my bonus this year (2016) got stuck in Vanguard's transaction processing queue during in-plan conversion and I'm in the middle of having their adjustment team figure out how to convert it... I would confirm your company allows the "in-service distribution to Roth IRA"; note this is different than the in-plan Roth conversion (401(k) -> Roth 401(k)), standard 401(k) loan, or withdrawal-with-penalty - you should ask your company's benefits team / the 401(k) plan administrator that they allow what you're trying to do. Evil Robot fucked around with this message at 22:51 on Feb 15, 2016 |
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Feb 15, 2016 20:50
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tjh5122 posted:Thanks for the response! Glad to hear you've been successful with this strategy. My company plan documents don't say anything about "in-service Roth distribution" but the plan allows an in-service after tax distribution. I think this should cover me. However, the guy from benefits said that when I make the 401(k) after-tax withdrawal, they only allow me to roll the earnings (pre-tax) to a traditional IRA and the after-tax contributions come in the mail to me. My goal is to put those right into the Vanguard Roth IRA. Both my company 401k and Roth IRA are hosted at Vanguard. I simply go through their website to initiate the distribution. There's a "Withdrawal" page that leads to a "Do you want to move after-tax money into Roth IRA?" page and then lets me selet amount of money / investments.
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Feb 15, 2016 22:48
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Bastard Tetris posted:I'm not really sure how "Mega Backdoor" this is, generally when you're in a position to put 40-50k/yr in a Roth you're above Roth income limits, then again I'm not sure if that counts for rollovers. I've used the backdoor conversion a few times, and it's a great way to funnel more money into Roth above contribution limits, I think I've got about 3x in Roth IRAs than I would have if I just did normal Roth contributions every year. Yes, this is generally a strategy to contribute more to your Roth IRA where you're already above Roth income limits, but there is no limit on income for rollovers. No, this has no effect on your taxes (you already have to pay taxes on money whether it goes into your after-tax 401k or your checking account). Evil Robot fucked around with this message at 08:49 on Feb 17, 2016 |
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Feb 17, 2016 08:45
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