Author Topic: Woo hoo!!! Paycheck just hit with first megabackdoor contribution!!!  (Read 3546 times)

YTProphet

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It's been a bit of time in the making, but my first megabackdoor Roth contribution was taken out of my paycheck that cleared today. Since I'm maxing my 401k, Roth IRA, and megabackdoor accounts, my paycheck doesn't quite cover all of my living expenses (still about 25% short). So, I had to wait until I sold a piece of land so that I could have cash reserves do make megabackdoor contributions until the govt puts the kibosh on it. Hopefully they take their time with that like they do with everything else and I can keep contributing for the next decade!

bigstack

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Re: Woo hoo!!! Paycheck just hit with first megabackdoor contribution!!!
« Reply #1 on: October 30, 2015, 07:15:55 AM »
this might be a dumb question....
but with the mega backdoor strategy do you request rollovers immediately into your roth ira to avoid gains on the additional after tax contribution?
aka are you requesting rollovers every paycheck/2 weeks?

YTProphet

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Re: Woo hoo!!! Paycheck just hit with first megabackdoor contribution!!!
« Reply #2 on: October 30, 2015, 07:55:13 AM »
this might be a dumb question....
but with the mega backdoor strategy do you request rollovers immediately into your roth ira to avoid gains on the additional after tax contribution?
aka are you requesting rollovers every paycheck/2 weeks?

Not a dumb question at all. And the answer, unfortunately, is yes. However, I can do it online through Vanguard's website, so it takes all of two minutes. A bit of a hassle but well worth it.

Tetsuya Hondo

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Re: Woo hoo!!! Paycheck just hit with first megabackdoor contribution!!!
« Reply #3 on: October 30, 2015, 08:06:13 AM »
Qu'est-ce que c'est des "megabackdoor contributions?" Did I sleep through something?

YTProphet

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Re: Woo hoo!!! Paycheck just hit with first megabackdoor contribution!!!
« Reply #4 on: October 30, 2015, 09:21:21 AM »
Qu'est-ce que c'est des "megabackdoor contributions?" Did I sleep through something?

It's for US folks (don't know if you're Canadian judging by the French). Here's a brief primer:
http://www.bedrockcapital.com/blog/bedrocks-guide-to-saving-for-retirement-the-mega-backdoor-roth-ira/
http://www.madfientist.com/after-tax-contributions/

therethere

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Re: Woo hoo!!! Paycheck just hit with first megabackdoor contribution!!!
« Reply #5 on: October 30, 2015, 09:35:35 AM »
That is so awesome! I am jealous!

Any advice in reading the documents to determine if I can do a mega back door contribution? The language makes no sense to me when I start reading the rules and my HR was absolutely zero help. Is this option usually for smaller companies or do larger corporations sometimes have the plan set up to be eligible?

401k is through Vanguard. Would they be able to help me investigate the potential if I give them a call? Any specific language to use?

JonasNC

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Re: Woo hoo!!! Paycheck just hit with first megabackdoor contribution!!!
« Reply #6 on: October 30, 2015, 09:44:28 AM »
My employer plan is through Vanguard and I called them to investigate if it was a possibility in my plan.  The key phrase you are looking for is what kind of contributions are allowed.  The normal types are "pre-tax" and "Roth 401k" contributions.  If your plan allows "after tax contributions" as well as the first two options, then you may be able to do a mega-backdoor contribution.  If you clear that first hurdle, then you need to find out if your plan allows "in-service distribution."  It is the after-tax (non-roth) contributions and in-service distributions that you need to do this kind of contribution.

Unfortunately, my plan didn't allow it, but Vanguard was very helpful in looking into my employer plan documents and helping me find out if it was an option.

Tetsuya Hondo

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Re: Woo hoo!!! Paycheck just hit with first megabackdoor contribution!!!
« Reply #7 on: October 30, 2015, 10:22:45 AM »
Qu'est-ce que c'est des "megabackdoor contributions?" Did I sleep through something?

It's for US folks (don't know if you're Canadian judging by the French). Here's a brief primer:
http://www.bedrockcapital.com/blog/bedrocks-guide-to-saving-for-retirement-the-mega-backdoor-roth-ira/
http://www.madfientist.com/after-tax-contributions/

Thanks! I hadn't heard of this. That looks pretty awesome. I'm not sure if it's applicable to my particular situation yet, but you've given me some good reading to mull over.

Tabaxus

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Re: Woo hoo!!! Paycheck just hit with first megabackdoor contribution!!!
« Reply #8 on: November 01, 2015, 06:52:54 AM »
I still can't get my employer to enable this.  It's very frustrating.  But, big law firm, lots of complexities around changing benefits issues in any way, and it isn't something law firms "have," so.

You'd think with the number of high earners at a firm, they'd love to be able to say that they have the most tax-efficient investment opportunities available to people.  Every single associate is in the range of income where mega backdoor contributions would be feasible (though many wouldn't do it, some because of loans, some because of frivolity).

 

Wow, a phone plan for fifteen bucks!