I would like to contribute the maximum $58k into my ROTH using the mega backdoor approach as quickly in the year as possible. It looks like the Amazon 401k plan at Fidelity limits the after-tax non-ROTH contribution to 10% of base salary. Per my calculations, that effectively draws out the contributions and limits it to ~$40k per year. Am I thinking about this wrong? Is there a way to get to the maximum $58k? Will switching from Fidelity help? What options do I have? TIA #personalfinance #investments #FIRE #401k
If its like msft the 58k includes pre tax contribution. So 19.5k of the 58k is going to 401k. The rest can roll into roth ira. So the max you can contribute to roth ira is 38.5k
Yes. But given Amazon limit of 10% of eligible compensation, the 3rd bucket of contribution you called roth ira can only go to $16k. So with employer match of $3.2k, the true maximum at Amazon seems to be $38.7k (i.e. 19.5+16+3.2). I'm just wondering if there's a way to get to the $58k.
No - you can’t do anything else other than asking HR to bump up limits
I thought Amazon had no after tax contributions
Looks like it became possible last year
It's correct that you can't hit the higher dollar IRS limits, that's enforced by Amazon so that they don't go against the IRS' company-level restrictions on 401k contribution disparities between employees with higher vs lower salaries. See the "Employee Retirement Income Security Act", companies providing 401ks need to prove their plans don't overly favour employees earning over $130k. Amazon limits to 10% of your salary going into an after-tax 401k (after the base $19.5k basic limit for traditional + Roth 401ks) to satisfy auditors during the annual 401k discrimination test. There are a lot of fulfillment center workers who have lower salaries so that any mega backdoor contributions are almost exclusively useful for high earning employees, so Amazon has to throttle more than tech companies that don't have physical warehouses and stores. Could they raise this limit and still be in the clear with the IRS? I'm not sure.
That's interesting. Had no idea there was a discrimination test employers have to pass.
I really don't think they can. They had trouble a few years back where 401k contributions were returned to the employees due to failing this test.
No there's no way. Only way would be for amazon to give a 401k match (a real one, not this vested bs) or significantly increase 401k participation by low-earners.
Throttling limits are interesting
It looks like this was changed in 2022 and now it should be possible to hit the maximum contribution: https://avieradvisors.com/blog/how-does-the-amazon-mega-backdoor-roth-conversion-work/ (link to embedded video: https://youtu.be/Dk35abhjWDM)
Yes. I'm using it right away and now contributing 50% of my base salary to the after-tax 401k. I want it to grow fast so when I leave Amazon, I would have a nice bag for Self_directed IRA
What is the difference between a back door ROTH and straight up investing the cash using fidelity or a similar company? I assume it’s the taxes of investing after tax money and then getting taxed again when you pull it from direct investments. Am I missing something?
Roth can only contribute 6k per year. Giga backdoor allows to contribute 30+k per year
Also when you change investments over the years in your retirement account, there is no taxes as well. Each time you sell stocks, there is no short/long term gain (or losses)