My workplace Fidelity 401k allows after tax contributions up to 75% of base pay and they also allow in service rollovers / distributions. I called fidelity and verified this.
That's good so you can do a mega backdoor Roth with your work plan.
My understanding is I will pay taxes on any gains that happen between the time I put it in the after tax and roll it over to the Roth but with such a short time it should not be that much.
Yes, that's correct. I am usually in a similar situation. Last year I ended up paying taxes on $8 worth of "growth". Negligible.
He says it does not matter if it is in the Roth or the after-tax IRA it will make no difference in the end
That makes no sense. How will it not make a difference? Consider two scenarios:
Scenario 1: You contribute 10,000 to after-tax and immediately roll over to Roth. In 5 years, let's say it grows to 25k. So you now have contributions=10k, and growth=15k. Your tax liability (assuming that you withdraw without penalty) is Z-E-R-O dollars since it's a Roth IRA.
Scenario 2: You contribute 10,000 to after-tax and leave it in there for 5 years, and it grows to 25k. So you now have contributions=10k, and growth=15k. If you withdraw all of it without penalty, you have tax liability on 15k of growth.
How does this not make a difference?
My thoughts of why I wanted to use the Roth
Points 1, 2, 3, 5 are correct. 4 - I don't know. 6 - can't predict the future, but seems like a reasonable assumption.
Looking for some guidance here to see what option is best or if I am missing something? When I look at it the way he is recommending I am going to pay taxes on the gains in the future VS the backdoor Roth I avoid paying taxes on the gains?
I'm confused with the above. Earlier you mentioned that the advisor said that after-tax vs roth doesn't make difference. But in the above paragraph you are saying that he's recommending that you'll pay taxes on future gains. I'm not sure what your advisor is saying in the above paragraph.
There are two kinds of rollovers you can do:
Rollover 1: Since your employer allows mega backdoor roth, you can contribute to after-tax 401k and immediately (or after a quarter like you said) you can roll over to a Roth IRA.
Rollover 2: Since you are ineligible to directly contribute to Roth IRA due to your income, you can open a non-tax-deductible traditional IRA and contribute to that (5,500$ per year per person) and then immediately roll that over to a Roth IRA (can be the same Roth IRA account as Rollover1 or a different Roth IRA account - makes no difference).
The 2 rollovers are independent of each other and you can do both if you have enough savings. Rollover1 is mega-backdoor-roth and Rollover2 is backdoor-roth. And rollovers do not have any income restrictions on them.
I hope that helps.