Doing some reading on MadFientist about this...but not sure I'm 100% understanding.
Currently, I'm investing in the following order...
1. 401k to Match
2. Max HSA
3. Max ROTH IRA (MAGI too high for traditional deduction, but below ROTH limits)
4. Max 401k
5. Taxable
My question is on Mega Backdoor Roth...can/should I do this? Here's some language from my company's benefits handbook...
"You may elect to contribute up to 100% of your eligible monthly salary, after legally required deductions, into the
Plan through payroll deductions only. You may change your contribution rate at any time. Your contributions may
be made on an after-tax basis (Regular Savings), a pre-tax basis (Deferred Savings), or an after-tax Roth basis (Roth
Savings) or any combination of Regular, Deferred or Roth Savings." --> So I can make after-tax contributions after maxing out pre-tax 401k...right?
And here's the part I don't quite follow...
"Roth In-Plan Conversion
This option allows you to convert all or a portion of your eligible RSP pre-tax contributions and non-Roth assets
(including after-tax contributions, rollovers and matching contributions, if any) to Roth assets within the RSP.
The benefit of holding converted Roth assets is that they may qualify to be distributed tax free (including
earnings), similar to distributions of qualified Roth IRA assets. The amount that may be converted is the amount
that may otherwise be withdrawn or distributed from the Plan.
Special tax rules apply to an In-Plan Roth Conversion and are an important consideration in determining whether
to do such a conversion. Generally, the taxable amount of a conversion is determined as if the converted assets
were distributed to you from the Plan as a taxable distribution, although the assets will only be transferred to the
Roth portion of your account and no amount will be actually distributed to you, therefore no penalty would apply
for an In-Plan Roth Conversion prior to age 59½. The taxable amount (determined as if actually distributed to you)
is taxable to you in the year of the conversion, and should be reported on your income tax return for that year.
For more information related to the tax consequences of a conversion, you should review the Savings Plan
Participant Guide and consult with your tax or financial advisor."
Can someone help me decipher this and how it relates to a mega backdoor roth and if I can/should use that?
Thanks!