Mega backdoor Roth
Looking to hear only from this who actually do mega backdoor Roth conversions on a regular basis, not those who may have just heard or read about it. I make after-tax contributions (and max out pre-tax) from my paychecks to my 401k account at Vanguard. The 401k plan allows taking in-service withdrawals of the after-tax contributions without any penalties. I have a Roth IRA account also with Vanguard. I would like to move the after-tax contributions from 401k to Roth IRA ASAP to avoid any tax on earnings. So I go to Vanguard’s website under my 401k plan to rollover the after-tax part into the Roth IRA account. I don’t see an option so I call Vanguard up and here’s what they tell me: - it’s possible to do what I want to do but, - I’d have to do it over phone by calling them after each contribution to initiate the roll over - not just that, but after I call them, they’ll mail out, yes mail out, some forms which will take 7-10 business days to arrive that I need to fill and sign and mail them back - every 2 weeks to do the rollover after each paycheck. - once they receive the paperwork, the rollover process takes another week at least. - the agent mentioned that if I had a Roth IRA account outside of Vanguard they would not need the paperwork each time but still would need me to call them to initiate the process. All of this sounds like it’s a deliberate attempt to make the process too difficult. Also it sounds backwards that Vanguard would make it easier to rollover the money to a Roth IRA account outside Vanguard than keep within. Is it so difficult to do this everywhere? Do other employers / brokerages make it easier? Ideally I’d like this to happen automatically or at least self-service on the website rather than having to call each time.
I have everything at vanguard and can rollover anytime online.
Google does the backdoor. It’s through vanguard too. Unlike you though, I have an option online to directly transfer it to my Roth.
Auto-rollover would be great. Sounds like it may have to do with rules of the employer/broker combination.
Try navigate to "employer plans", then "manage my money", then "manage my loans and withdrawals", "estimate and request a withdrawal", and check "move after tax money to vanguard Roth IRA"
Thanks. Following this, after I click on “estimate and request a withdrawal”, I get “choose your withdrawal amount” and then only 2 options: electronic bank transfer, or check. No other option like move to Roth IRA that you mentioned.
I can only see the option if there actually is after tax money available for rollover.
I convert the after tax contribution to Roth 401k after every paycheck. In our case, it is possible to do everything online. I never tried to roll it to Roth IRA. Why do you want to do that instead of using Roth 401k?
Microsoft/Fidelity allows you to convert to Roth after each paycheck as well if you call Fidelity. There is nothing else beyond that is you make the call. The difference between that and the quarterly conversions is your tax exposure. You are taxed on any earnings, so the quicker you convert to Roth, the less time for earnings to grow where they will be taxed.
Sounds about right. I work for Apple. I can do the MBD rollover up to 4x/yr, and I need to fax or mail in the form to do so. I can’t initiate it electronically or on the phone. I fax the form in to my 401k provider every 3 months, then my 401k provider sends a check in the mail to my Roth IRA account at schwab. Not convenient if you’re going to do it every paycheck. I don’t mind the hassle 4x/year but I do find the process to be silly.
Thanks. How do you deal with the earnings you’d have accumulated on the after-tax contributions while they sit in your 401k?
I’ve been doing the conversion by phone, but still have to get check in mail then deposit to Roth IRA by mail.