Author Topic: Not Eligible for ROTH IRA - "Backoor Roth" through 401k  (Read 1960 times)

On_a_slow_boat

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Not Eligible for ROTH IRA - "Backoor Roth" through 401k
« on: January 17, 2014, 09:25:22 PM »
Because of the income limits I have not been able to contribute to my Roth for several years and don't expect to be able to as long as I keep employed.

I do make a mixture of pre-tax and Roth K contributions to my 401k and get to the contribution cap each year, I work for a large company with a plan I am quite happy with.

I just recently finished reading my 401k Summary Plan Description (SPD). My plan allows for In Service Withdrawals for post-tax contributions.  I also understand that these can be rolled into a ROTH IRA with only getting taxed on any of the investment earnings.

I am allowed to contribute up to 11% of my salary to Post-Tax contributions each year in my 401k.

Does anyone have experience doing in service withdrawals to "Back door" into a Roth IRA?  Please share your thoughts on the pros / cons.  Frequency? Recommended IRA provider? (I have a small amount in a Fidelity ROTH now)

thanks!

shuffler

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Re: Not Eligible for ROTH IRA - "Backoor Roth" through 401k
« Reply #1 on: January 18, 2014, 01:19:33 AM »
I did this for the first time in 2013.  My employer's plan has a fixed $20k limit on after-tax contributions, rather than a %-age cap as yours does.  Everything has gone smoothly so far ... though I haven't received my tax-statements yet, so we'll see.

I'm not an authority, but one thing you said wasn't familiar to me.  My plan also supports "in service" rollovers, but they need to remain within the 401k plan as long as I'm employed.  So in my case it didn't involve an IRA at all.  The money is still in my employers overall 401k plan, only now it is being treated as "roth" (rollover) contributions and is growing tax-free.

shuffler

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Re: Not Eligible for ROTH IRA - "Backoor Roth" through 401k
« Reply #2 on: January 18, 2014, 01:24:06 AM »
Also - Why not do a backdoor Roth IRA separately from (and in addition to) this 401k trick?

On_a_slow_boat

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Re: Not Eligible for ROTH IRA - "Backoor Roth" through 401k
« Reply #3 on: January 18, 2014, 06:45:09 AM »
Thanks for the replies.   I think what I am trying to get at, is that I would like to do what is called a "in service withdrawal" taking the money out of my 401k and it ending in a ROTH IRA . I am still employed by the company so this limits my withdrawal options. The goal is to get the money into a Roth IRA so that I get 2 attributes:

1) Roth tax treatment
2) IRA investment options


I think doing an "in plan roth conversion" has some appeal - but I'd be missing out a bit on the ability to invest in some different assets. For example individual stocks.


Undecided

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Re: Not Eligible for ROTH IRA - "Backoor Roth" through 401k
« Reply #4 on: January 18, 2014, 08:35:47 AM »
Recent discussion of in-service withdrawal to IRA, conversion to Roth IRA, here: http://www.mrmoneymustache.com/forum/investor-alley/$10k-after-tax-into-401k-or-brokerage-account