So first a little background on our situation, we max our 401ks, HSAs, backdoor Roth IRAs, and have enough savings leftover to contribute to our Vanguard brokerage account.
Recently my wife found out that her employer allows her to:
1) Make after-tax contributions in addition to pre-tax and Roth contributions
2) Convert after-tax contributions to Roth using a new Roth in-plan conversion feature
3) Setup automatic after-tax conversions to Roth (there doesn't seem to be a fee to do this, but I will check)
So if she were to contribute to the after-tax account and immediate convert it to a Roth 401k, it is my understanding that this would be very similar to the megabackdoor Roth IRA. So my questions are:
1. Is this essentially the same as a megabackdoor Roth IRA except that the funds would be in a Roth 401k?
2. Any reason we shouldn't take advantage of this (her company offers low-cost index funds)?
3. What are the withdrawal rules for a Roth 401k before age 59.5? Are the rules similar to that of a Roth IRA (5 year wait period, no penalty/tax on withdrawing the contributions)? I know one difference would be that in order for her to access the funds she'd have to leave her employer.
TIA!