Author Topic: Mega Backdoor Roth Questions  (Read 611 times)

Unique User

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Mega Backdoor Roth Questions
« on: August 22, 2018, 08:42:46 AM »
I just set up my spouse's after tax contributions and he called today to roll over the post tax amount to his Roth.  I read the below on the IRS website and it seems like he needs to roll over the entire contribution for that paycheck at once - pre tax to his tIRA and post tax to his RIRA.  Is that what we should be doing or can we just roll the post tax?   

Also are these roll overs considered contributions and we can access for college costs without penalty if needed?

I have the ability (per my plan documents, but ADP workforce is clueless) to make after tax contributions up to the $55k limit, but in-service, non-hardship withdrawals are not allowed.  I'm planning on quitting within 20 or so months anyway and we have about $80k of cash I'd like to shelter from FAFSA so it seems like a no brainer to set up the max.   

If I did a conversion from my tIRA in 2008 to my RIRA, can I access the conversion and all my contributions for college costs without penalty if needed?

When I do leave it looks like I can roll my after tax contributions to my RIRA and my pre-tax contributions as well as all gains on after tax and pre-tax to my tIRA and won't owe any taxes.  Is that correct?

https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans


MDM

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Re: Mega Backdoor Roth Questions
« Reply #1 on: August 22, 2018, 09:29:24 AM »
Yes to all questions.  Best wishes for you and your child through the college years!

Unique User

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Re: Mega Backdoor Roth Questions
« Reply #2 on: August 22, 2018, 12:14:36 PM »
Thanks MDM!!  Just so I am clear, yes we need to roll over the entire paycheck 401k contribution to tIRA and RIRA? 

ixtap

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Re: Mega Backdoor Roth Questions
« Reply #3 on: August 22, 2018, 12:50:49 PM »
Thanks MDM!!  Just so I am clear, yes we need to roll over the entire paycheck 401k contribution to tIRA and RIRA?

No. Any pre tax contribution, plus employers contribution can be left in the 401k. Any gain on the post tax must be roled over to tIRA or tax paid to roll into Roth IRA.

MDM

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Re: Mega Backdoor Roth Questions
« Reply #4 on: August 22, 2018, 02:26:10 PM »
Thanks MDM!!  Just so I am clear, yes we need to roll over the entire paycheck 401k contribution to tIRA and RIRA?

No. Any pre tax contribution, plus employers contribution can be left in the 401k. Any gain on the post tax must be roled over to tIRA or tax paid to roll into Roth IRA.
That is correct.

I read "entire contribution for that paycheck" as "entire amount in the after-tax account" (which is what the IRS guidance addresses).

Not that it lets me off the hook for misreading, but the law generally doesn't allow rollover from a 401k elective deferral to an IRA unless one has left the employer sponsoring the 401k, or is over 59.5.  See 401k Resource Guide Plan Participants General Distribution Rules | Internal Revenue Service.

Unique User

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Re: Mega Backdoor Roth Questions
« Reply #5 on: August 23, 2018, 01:52:43 PM »
Thanks for the replies.  So glad I did it right by just rolling the after tax amount to the Roth and leaving everything else there.  Thanks again!!