Backdoor Roth & Mega Backdoor Roth. Can I do both?

[jamesbond007]

Hi all,
My new employer allows me to do the Mega Backdoor Roth trick. Which is great. However, have a few questions regarding the same:


1. I currently to a backdoor Roth for myself and DW as my AGI does not allow any Roth contribution. I do this every year in December on Vanguard. Can I still do this if I opt to do the Mega backdoor Roth from my employer?
2. Can I move the post tax money, when I convert my 401K into Roth via mega backdoor, to Vanguard? My employer offers fidelity 401k but all my personal investment accounts, including Roth, are in Vanguard. This is just for simplicity.


PS: Neither of us have any IRAs so tax is not an issue during conversion. Also, my employer offers a "daily" conversion option for mega backdoor so tax liability is almost $0.


Thanks.
007

[shuffler]

#1 - Yes, you can do both.
#2 - I think this depends on your 401k.  Mine rolls over and stays within the 401k plan, so no opportunity to move it elsewhere.

[jamesbond007]

#1 - Yes, you can do both.
#2 - I think this depends on your 401k.  Mine rolls over and stays within the 401k plan, so no opportunity to move it elsewhere.

Great. Thank you.

[seattlecyclone]

I would guess that the daily conversion would only be available for people who wish to leave the money in the company's Roth 401(k) rather than moving it elsewhere. You'd have to check your company's plan information though.

[jamesbond007]

I would guess that the daily conversion would only be available for people who wish to leave the money in the company's Roth 401(k) rather than moving it elsewhere. You'd have to check your company's plan information though.

Did not pay attention to such details :) I will find out. But Fidelity is not bad haha. I was just hoping for some simplicity. I don't mind leaving it there.

[ohsnap]

I would guess that the daily conversion would only be available for people who wish to leave the money in the company's Roth 401(k) rather than moving it elsewhere. You'd have to check your company's plan information though.

Did not pay attention to such details :) I will find out. But Fidelity is not bad haha. I was just hoping for some simplicity. I don't mind leaving it there.

Yes make sure you know all the details. I had to dig really deep on my husband's plan.  He's eligible for rollovers from after-tax 401k to Roth 401k, and also eligible for in-service rollovers to a Roth IRA.  Since either requires paperwork (yes, actual paper forms), I thought the end result as far as hassle etc. would be the same.  Then I clicked on a "plan updates" button on the website and found out they have a $50 fee for every withdrawal.  That would be a LOT of fees by the end of the year if we are rolling over every 2 weeks. So he's going with the rollover to a Roth 401k, and then possibly 1x a year roll that over to a Roth IRA.

[robartsd]

I would guess that the daily conversion would only be available for people who wish to leave the money in the company's Roth 401(k) rather than moving it elsewhere. You'd have to check your company's plan information though.

Did not pay attention to such details :) I will find out. But Fidelity is not bad haha. I was just hoping for some simplicity. I don't mind leaving it there.

Yes make sure you know all the details. I had to dig really deep on my husband's plan.  He's eligible for rollovers from after-tax 401k to Roth 401k, and also eligible for in-service rollovers to a Roth IRA.  Since either requires paperwork (yes, actual paper forms), I thought the end result as far as hassle etc. would be the same.  Then I clicked on a "plan updates" button on the website and found out they have a $50 fee for every withdrawal.  That would be a LOT of fees by the end of the year if we are rolling over every 2 weeks. So he's going with the rollover to a Roth 401k, and then possibly 1x a year roll that over to a Roth IRA.

I thought the IRS limits the annual number of roll overs from 401k to IRA anyway. Glad you can do the Roth conversion within the 401k.  Depending on investment options and fees, I might not even to the annual in-service rollover; but it would give you more flexibility down the road as after 5 years seasoning the Roth IRA funds would be available for withdraw for any reason.

[ender]

Find out if you can setup auto conversions. My last 401k had this with fidelity, it'd auto convert all contributions. I think my 1099R showed $0.01 in taxable rollover last year.

New employer doesn't and I have to call in and talk to them every two weeks. Which is just annoying.

[robartsd]

Find out if you can setup auto conversions. My last 401k had this with fidelity, it'd auto convert all contributions. I think my 1099R showed $0.01 in taxable rollover last year.

New employer doesn't and I have to call in and talk to them every two weeks. Which is just annoying.

And more work for them. Convince enough of your coworkers to do the same and they might find it worthwhile to build an auto-conversion system.

[ender]

Find out if you can setup auto conversions. My last 401k had this with fidelity, it'd auto convert all contributions. I think my 1099R showed $0.01 in taxable rollover last year.

New employer doesn't and I have to call in and talk to them every two weeks. Which is just annoying.

And more work for them. Convince enough of your coworkers to do the same and they might find it worthwhile to build an auto-conversion system.

It's already a fidelity option that is enabled on some plans (my previous one). My current plan (also with fidelity) does not support it though.

[robartsd]

It's already a fidelity option that is enabled on some plans (my previous one). My current plan (also with fidelity) does not support it though.

I can't imagine that Fidelity would charge your employer any more to service the plan if this option were enabled (might charge something to make the change). Perhaps you can speak to your benefits person about looking into changing the plan.

[ender]

It's already a fidelity option that is enabled on some plans (my previous one). My current plan (also with fidelity) does not support it though.

I can't imagine that Fidelity would charge your employer any more to service the plan if this option were enabled (might charge something to make the change). Perhaps you can speak to your benefits person about looking into changing the plan.

I already have :-)

[jamesbond007]

Find out if you can setup auto conversions. My last 401k had this with fidelity, it'd auto convert all contributions. I think my 1099R showed $0.01 in taxable rollover last year.

New employer doesn't and I have to call in and talk to them every two weeks. Which is just annoying.

Confirmed. They do auto rollovers in my plan.

[seattlecyclone]

I thought the IRS limits the annual number of roll overs from 401k to IRA anyway.

What's limited are the "60-day rollovers," where you can take a withdrawal from your retirement account, deposit it in your checking account, and then redeposit it in another retirement account within 60 days with no tax consequences. People were doing crazy things with the money in that time, so the IRS limited how often you can do these. You shouldn't be using your retirement account as a payday loan provider. If you have a rollover check made out directly to the next retirement account, as far as I know there's no limit to how often you can do these.

[jamesbond007]

What's limited are the "60-day rollovers," where you can take a withdrawal from your retirement account, deposit it in your checking account, and then redeposit it in another retirement account within 60 days with no tax consequences. People were doing crazy things with the money in that time, so the IRS limited how often you can do these. You shouldn't be using your retirement account as a payday loan provider. If you have a rollover check made out directly to the next retirement account, as far as I know there's no limit to how often you can do these.

Sounds crazy and scary at the same time.