How does traditional 401k rolling over to Roth IRA works?
Amazon 401k the through vanguard This is called mega backdoor roth, correct? How does this work? You roll over how much how often? What's the benefit of doing this?
The standard mega back door Roth allows employees to contribute over the annual limit to a Roth and not be subjected to the income eligibility limits. Typically in order to pull it off you need 2 things for your company’s 401k. You need to be able to make after-tax contributions. This is NOT the same as Roth 401K contributions. Your plan also needs to allow in-service withdrawals. This allows you to contribute the normal 19k limit as either traditional or Roth but also contribute up to the annual total contribution max(56k in 2019) combined with employer contributions. You can then do an in service withdrawal rollover of after tax 401k contributions to your Roth IRA. Doing so allows you to circumvent both the income limit and 6k contribution limit.
If your salary is over 133k or something you’re not eligible to contribute to a Roth IRA. But if you open a traditional Ira then transfer it to a Roth no problems. I usually contribute to traditional one day and transfer the funds over one day later. Easier if you don’t invest the money before transferring