End of 2022 Salary Survey
12-28-2022 | 04:47 AM
#241
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Joined: Oct 2014
Posts: 1,283
Likes: 191
If your custodian offers in-plan conversions you immediately convert that after-tax money to Roth and thus pay no taxes on the capital gains when you withdraw in retirement. Look up ‘mega backdoor Roth’.
12-28-2022 | 06:40 AM
#242
Gets Weekends Off
Joined: Nov 2020
Posts: 2,235
Likes: 80
You can also do that from just a normal after tax IRA so no need to use your custodian to do a back door Roth.
12-28-2022 | 11:02 AM
#244
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Joined: Jun 2014
Posts: 592
Likes: 1
There’s a couple advantages. First, it immediately rolls into the 401K, and is essentially identical to Roth contributions, with the same benefits. 2nd, you can race the company to the annual contribution limit, minimizing the pre-tax dollars they manage to put in before you hit the limit. That makes almost the entire retirement account a Roth if one so chooses, and obviously the value can be pretty high if this strategy is started early.
This only works for companies that offer “automatic in-plan conversion” and cash over cap.
This only works for companies that offer “automatic in-plan conversion” and cash over cap.
12-28-2022 | 11:11 AM
#245
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Joined: Jun 2014
Posts: 592
Likes: 1
Both sounds great but at some point I like to have some cash to spend today. I think I'll enjoy having nice things in my 40s just as much as in my 60s/70s...I will venture to guess that almost everyone posting on here has an effective savings rate probably double the national avg and will be just fine in retirement barring a total collapse of the market. Not saying yours isn't a great idea, it is, but I have seen some very well off people who don't plan to retire early but still live like they have no money. And my question is to what end? Side tracked a little..my apologies.
12-28-2022 | 11:38 AM
#246
Gets Weekends Off
Joined: Mar 2018
Posts: 3,631
Likes: 207
Both sounds great but at some point I like to have some cash to spend today. I think I'll enjoy having nice things in my 40s just as much as in my 60s/70s...I will venture to guess that almost everyone posting on here has an effective savings rate probably double the national avg and will be just fine in retirement barring a total collapse of the market. Not saying yours isn't a great idea, it is, but I have seen some very well off people who don't plan to retire early but still live like they have no money. And my question is to what end? Side tracked a little..my apologies.
That's entirely up to you... it just seems like some people don't know of that feature. If you have more money than you need and want more roth, it's a good, tax-efficient place to put it. At UAL, we don't have cash over cap, so I limit it to the max combined contribution to avoid more money than I'd like in our Rertiree Health Account, where the spill goes.
12-28-2022 | 12:28 PM
#247
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Joined: Feb 2017
Posts: 345
Likes: 98
I hadn’t heard that. If so, that’s fantastic news.
12-28-2022 | 01:47 PM
#248
Config 3
Joined: Oct 2014
Posts: 1,283
Likes: 191
Total IRA contributions for 2023 (if under 55) are limited $6500. For a 401(k) the limit is $66,000. A backdoor Roth and mega backdoor Roth are two separate things and you can take advantage of both at the same time.
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