Some nitty gritty retirement discussions going on some of the other threads. It's clear that some of the posters (Higney, Gunfighter, etc) have some detailed knowledge...hoping to start a discussion, without the generation war if possible, around the Mega Backdoor Roth option in the 401k.
TLDR - If a pilot is going to save for retirement in a taxable brokerage account, does it make sense to instead use the Mega Backdoor Roth feature of the 401k?
Assumptions, the pilot:
- Doesn't mind using the MBCBP for the "fixed income" portion of portfolio. Content to rebalance elsewhere to achieve desired assett allocation
- Plans to earn enough to fill up to/beyond 415c limit
- Prefers to maximize tax deferrals in the current year
- Plans to save above and beyond personal/company 401k contributions
- Is filling other available tax advantaged accounts (HSA, Backdoor IRA for self/spouse, etc)
For easy numbers, say you want to save another $60k towards retirement. If the goal is to minimize spill/MBCBP $, then all of that money will likely be saved in a brokerage account, and will be funded with income subject to taxes, SS, medicare, DPMA/ALPA dues, etc.
Consider instead, you cranked up 401a "After Tax" contributions in January/February (particularly if there is profit sharing on 2/14) to run the Mega Backdoor -> Roth maneuever in order to save the same $60k. Wouldn't this have the effect of maintaining ~ the same annual tax deferral but allow that $ to go into a Roth account, while saving on payroll taxes & ALPA/DPMA deductions?
Seems like a good balance to arrive at retirement with more diversified silos of money, and should nullify RMD considerations for all but the biggest super savers.
Other than potential decreased liquidity by locking that $60k into a Roth account vs Brokerage any other downsides?