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Old 06-29-2018, 06:45 PM   #11  
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Originally Posted by grahamlax View Post
what is the difference between a backdoor roth ira contribution (single- putting $5,500 in to regular IRA, paying one day of tax, and rolling it in to my roth IRA), and the mega backdoor roth ira contribution?
Mega backdoor refers to 415c limits of $55k vs the $5.5k IRA limit.
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Old 06-29-2018, 07:08 PM   #12  
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When you guys do the mega backdoor, does it make it any easier using a Fidelity Roth IRA, or is it the same process to move the money to a different company (and is it easy)? I currently have a Roth with Vanguard and just wondering how easy the transfer process would be..or if it'd be a headache every time I move money.
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Old 06-29-2018, 07:55 PM   #13  
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Originally Posted by m3113n1a1 View Post
When you guys do the mega backdoor, does it make it any easier using a Fidelity Roth IRA, or is it the same process to move the money to a different company (and is it easy)? I currently have a Roth with Vanguard and just wondering how easy the transfer process would be..or if it'd be a headache every time I move money.
I have a Roth IRA with Vanguard as well. They have to cut you the the check in care of your Vanguard Roth IRA, then you have to send it to Vanguard. That seemed like a pain, so I just opened a Fidelity IRA, which they can just transfer over the phone.
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Old 06-29-2018, 09:24 PM   #14  
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Keep these income limits in mind;

https://www.fidelity.com/retirement-ira/contribution-limits-deadlines

Youíre likely over the income limit to make a deduction on a TRADITIONAL IRA contribution. HOWEVER you may make a NON DEDUCTIBLE contribution to a TRADITIONAL IRA. You make this non deductible by filling out a form 8606 at tax time. This money which you have contributed to a TRADITIONAL IRA can then be rolled over into a ROTH IRA. There is no income limit on doing this and is your BACKDOOR ROTH IRA contribution.

So;

-Contribute to a Traditional IRA
-Donít take a deduction at tax time (assuming youíre over the income limit to do so)
-Roll to a Roth IRA

Extra tip; roll the money from the TIRA to RIRA sooner rather than later. Also leave it as cash when you contribute it PRIOR TO the roll over. This will avoid gains on the money while it sits in account that make your tax life a little bit more difficult come April 15th.

Another tip; open the TIRA and fund it, then close it after you roll it over. Repeat annually. It makes accounting MUCH easier. If you already have a TIRA open with a balance, you may want to see an accountant as a new set of rules called the ďpro rata ruleĒ now applies. If you donít already have a TIRA with a balance, disregard and follow steps 1-3 above.

I find keeping all of this stuff in house a Fidelity to be the easiest way versus having multiple accounts at multiple brokerages. Fidelity is competitive with their commissions and expense ratios on their funds when compared to everyone else. I donít see a huge advantage to going through the PITA of transferring money via paper check, personally. Thatís your call though!
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Old 06-29-2018, 10:07 PM   #15  
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Yes you can. I have contributed $0 to 401k. 100% of my contributions have been 401(a).
How exactly do you convert it to the Roth IRA? All at once at the end? Immediately after you put the money into the 401a? If you could enlighten the rest of us exactly how to do this I would appreciate it!!
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Old 06-30-2018, 12:03 AM   #16  
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How exactly do you convert it to the Roth IRA? All at once at the end? Immediately after you put the money into the 401a? If you could enlighten the rest of us exactly how to do this I would appreciate it!!
- I currently direct Delta's 16% into Fidelity BrokerageLink.
- I also direct 24% individual contribution and 100% of profit share into BrokerageLink. ALL of the individual contributions are AFTER TAX or 401(a).

- Delta's contributions cannot be moved out of the 401k.
- Every two weeks, immediately after I see the after tax money sitting in my BrokerageLink account, I call Fidelity and tell them, "I'd like to transfer all the after tax money into my Roth IRA. (You want to do this right away, because if that after-tax money has a chance to gain earnings, they become taxable, and the earnings cannot be moved into the Roth IRA.)

- From there, it is actually a two-step process. First, it must be moved from the BrokerageLink side to the DPSP side. After that is done, it is moved from the DPSP to the Roth IRA. Fidelity handles both of those steps. It usually takes 2-3 days from my phone call before it is sitting in the Roth IRA. (As a side note, you may be able to get this down to a single step if you direct your money directly into the DPSP, but my process works for me.)

- The best way to think of this (and how it was explained to me), is that you are in a race against Delta. Delta is putting in money every two weeks (based on the number of hours you fly). The TOTAL combined limit is $55,000. The goal is to get to $55,000 as quickly as possible. The quicker you do it, the greater YOUR percentage of $55,000 is, and thus, the greater amount you can get into your Roth IRA each year. Some guys get there in February with Profit Sharing and contributing 75% of their pay.
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Old 06-30-2018, 05:58 AM   #17  
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Great information here. I had no idea about this.

A few questions:
-After you have maxed out the "Mega Backdoor Roth IRA" what happens to the rest of the money from your employee+Co. direct contribution? Is it just the same scenario as if you hit the 401(k) max and have the extra money deposited as cash?

-If it's just cash, what are you guys doing with that money? Are there other tax-advantaged things to do with it?

-Am I undestanding correctly that you can also contribute $5500 to a Roth IRA in addition to the "Mega"? Assuming you don't hit the $189k earnings limit and have the $5500 reduced.

Thanks
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Old 06-30-2018, 06:35 AM   #18  
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A few questions:
-After you have maxed out the "Mega Backdoor Roth IRA" what happens to the rest of the money from your employee+Co. direct contribution? Is it just the same scenario as if you hit the 401(k) max and have the extra money deposited as cash?

.....itís pushed to DPSP Cash, so it goes into your pocket.

-If it's just cash, what are you guys doing with that money? Are there other tax-advantaged things to do with it?

....great question, a lot of people do real estate, a lot of people out it into their brokerage accounts and invest it, some save it. Thatís your call but do have a plan for it. Otherwise, you may just be better off timing your contributions and company contributions to hit the $55k limit towards the end of the year. In reality, all this is doing is moving numbers around the balance sheet. Itís a finite amount of money and you can choose to take less income at the start of a year for more and the end of a year or vice versa. Or you could space it out equally over the year. Whatever you choose, just have a plan for the money.

-Am I undestanding correctly that you can also contribute $5500 to a Roth IRA in addition to the "Mega"? Assuming you don't hit the $189k earnings limit and have the $5500 reduced.

......yes, in addition to the mega backdoor, you can also do the $5500 backdoor. This comes in handy when you are over the Roth IRA income limit. The backdoor essentially eliminates any income restriction by using the 3 step process I outlined above.
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Old 06-30-2018, 08:36 AM   #19  
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-Am I undestanding correctly that you can also contribute $5500 to a Roth IRA in addition to the "Mega"? Assuming you don't hit the $189k earnings limit and have the $5500 reduced.

Thanks
Yes. Roth IRA if you are under the income limit. Backdoor Roth IRA if you are over the income limit. If you will be close for the year, just do the backdoor Roth IRA to begin with.

My preference for the extra DPSP Cash from that point on is real estate. When the real estate or other outside investments start producing income, you can look into a SIMPLE IRA as an additional method of tax deferral.

MOST IMPORTANT STEP:
Get competent financial advice outside of APC keyboard warriors. There is a reason we fly airplanes instead of manage hedge funds.
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Old 06-30-2018, 08:44 AM   #20  
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Originally Posted by m3113n1a1 View Post
Love the financial knowledge on this forum. What's the advantage of doing 401a vs Roth 401k? Is it just because you can pull it out of the company account and roll it into your own Roth IRA (mega backdoor)?
You guys are Mega Backdoor smart....I may need a new Tax guy!!

Baja.
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