Way late to this party, apologies...
If your employer offers a 401(k) with an after-tax (
not Roth, but after tax) contribution option
AND offers in-service distributions, then you can toss quite a hefty chunk of change (up to $50k) into a Roth IRA every year via a rollover.
Basic idea: - You pay taxes on your money
- You contribute said after-tax money to your 401k (after-tax contribution)
- A few times a year (number defined by your plan), you call up your plan and request an in-service distribution of your after-tax funds
- You roll this in-service distribution directly into a Roth IRA. This direct rollover is what prevents you from paying the penallty for early withdrawal
- You pay taxes only on the earnings of your contributions (which had <1 year to earn money, hopefully only 1 quarter), then once these taxes are paid this money is also bundled into your new Roth IRA
A decent description of this can be found here:
http://cdn.ameriprisecontent.com/cds/alwp/advisor/jay.d.jacobs/cusersjjacob3desktopjump-start-your-roth-ira-with-a-401k-after-tax-conversion-4-11634680185434967153.pdfNote that this is NOT a contribution to an IRA, it's a rollover--you can still contribute $5k to your Roth IRA (if you were eligible, anyway).
Also note that your tax-sheltered 401k contributions are limited to $17,000 (2012), but the limit for
total contributions (tax-sheltered, employer match, and after-tax dollars) is
$50,000 or 100% of compensation (2012).
It's basically the same idea as the 'backdoor' IRA (nondeductible IRA converting to Roth IRA) but I believe without all of the hassle involved in tracking tax basis.
In the process of doing my first rollover.... If anyone else has done this let us know!