Lump sum after tax 401k contribution

[daschallenberg]

Hello:

I was reading through my employer's retirement handbook and learned we have the option to make lump sum contributions to the after-tax 401k bucket. This still has to abide by the maximum contributions for a retirement plan. So I have been considering slowly liquidating my taxable brokerage holdings (either creating a loss or minimal capital gains) and would be placing that into my after-tax 401k account. I am curious if anyone else has this option or has already been doing this. I am also curious about any issues down the road? Or other aspects to consider?

*employer does allow in-service distributions...so would be able to use the mega backdoor roth
*investments in the 401k are cheaper than Vanguard (institutional funds)
*possibly worried about not being able to touch earnings until 59
*Current balance in taxable account is approximately $120k. So along with monthly contributions to the after-tax account, this is the amount I would be liquidating and placing into the after-tax account

Details about my situation; 32, married filing jointly, 2 kids, one income. Currently renting, more than likely will be purchasing home in the future but date undetermined (the money in the taxable account would be used for down payment or cash purchase)  FIRE date not really set in stone at this point.

Thanks!

[terran]

I didn't know lump sum contributions were a thing, but a plan that allows after-tax contributions and in-service withdrawals are a great thing! We're doing the same thing by doing mega backdoor Roth contributions we wouldn't otherwise be able to afford to "convert" taxable to Roth.

I wouldn't worry about not being able to withdraw earnings (that is to say, I'm not worrying about it). The contributions, which you will be able to withdraw, should be enough to fund living expenses and taxes for the 5 years it will take you to get a Roth conversion ladder going with your traditional 401(k)/IRA balances.