Can you do this? would it make sense?

[Crazycarl]

If your plan allowed....Could or would you max out your Roth 401k as early as possible, then pull out the contributions, and then set it to max out the 401k to get the tax deduction?

Would this get more money into a Roth, but then allow the tax deduction? I know the timing of the market might come into play as well as you making enough and your plan allowing that high of an allocation to get there that fast.

Thoughts?

[braje]

You still can only put 18000 into the 401(k). Also don't think you can pull out the contributions and then put back

[jjcamembert]

I don't see how that would be any different than saving the money in a taxable account and then maxing the 401k. And the 401k contribution limit counts toward both Roth and regular combined.

Also, there would be significant transaction fees if you are investing in some fund, both for buying and selling. Some funds have rules about what timeframe you can withdraw the money as well.

[Aggie1999]

OP: You should look into an in-service mega backdoor roth IRA if you are looking to put more money into your retirement accounts. Your 401k plan needs to allow after-tax contributions and in-service withdraws. Can also be useful if your plan only allows the after tax contributions but not the in-service withdraws.

Note that many 401k plans do not allow these things. Read your plan documentation and your HR website. You might be surprised.

[Crazycarl]

Forgot about the fees portion....

That would def make a difference. I think only one fund has a 90 day stipulation for fees. My 401k is through fidelity.

The difference between a Taxable, would be any gains and dividends that may happen while the money is int he Roth portion, would stay and continue to grow tax free. If the investment goes down, then you start the buying at the lower cost anyways.

I have to check out the backdoor Roth more.

Does it matter if my wife has a traditional and I have a Roth? Or since this would all by from my paycheck its only my accounts that matter?

Thanks

[MustacheAndaHalf]

So you contribute $18,000 to a Roth 401(k) and then you're done for the year.  It doesn't matter if you withdraw the money - you still contributed $18,000 that year.  You'd have to ask your employer both about recharacterizing contributions and withdrawing money from a 401(k) while still employed there.

Annually an index fund has 2% dividends, but you'd be switching to regular 401(k) before getting the December dividend... so call it 1.5% dividends.  With $18,000 in taxable, that would be $270 in dividends.  In the typical tax bracket, qualified dividends are taxed at 15%, which means owing $41 tax on the $18,000 invested in taxable.