Mega Backdoor 401k

Aug 16, 2019 27 Comments

So I’ve read up on this topic but can someone help clarify this for me. It sounds like this lets one just contribute more in a year, why would i want to do this compared to just opening a roth or standard IRA? As far as i get it, MSFT will only match up to 9500 so what is the benefit? Meaning, why should I not just put in 19k in the 401 & other savings elsewhere?

Thanks for the help

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TOP 27 Comments
  • Lyft !lyft
    Traditional IRA and Roth has qualifing income limitation. Only way you can contribute to Roth is doing a backdoor ($6k per year) or mega backdoor ($35k per year if your employer allows such as Microsoft). Roth is tax free gains if the money you put through IRA is post tax.
    Aug 16, 2019 9
    • Microsoft cWww76
      As I understood, you cannot take money from 401k Roth while you are working in your company. Also, choice of investments is limited to the plan (which could be good sometimes).
      Aug 18, 2019
    • Microsoft cWww76
      @Trzjdg, Fidelity suggests it on the page with account information (transfer 6k to traditional IRA and convert them to Roth IRA).
      Aug 18, 2019
  • Postmates setamtsoP
    Your profits are tax free right?
    Aug 16, 2019 1
    • Microsoft / Eng thisisbill
      OP
      Well i do roth, so is the point that i save the tax on the gains? That would make a lot of sense lol
      Aug 16, 2019
  • Google SdrPikachu
    Dang, MS compensation must be worse than I thought if you're still below the Roth contribution income limit...
    Aug 16, 2019 5
    • Microsoft / Eng thisisbill
      OP
      Damn the limits only 130k uggghhhhhh
      Aug 16, 2019
    • Microsoft cWww76
      The limit doesn’t matter if you do backdoor (any of two).
      Aug 16, 2019
  • Airbnb / Mktg Jonny555
    Is there a situation you wouldn’t want to do this?
    Aug 16, 2019 4
    • Microsoft unf
      @Lyft its easier to stop putting money in retirement than it is to put more in. Let your shit grow tax free up until when you know you have enough in. Then just stop and save/invest in non retirement accounts
      Aug 17, 2019
    • Cisco Bonuz
      That makes a lot of sense unf.
      Aug 17, 2019
  • Microsoft techladki
    Dude you can only do 6k through non deductible IRA to Roth conversion.

    None of us are eligible for Roth or tax deduction IRA
    Aug 16, 2019 2
    • Lyft !lyft
      Check out mega backdoor. Microsoft allows upto additional post tax $35k per calendar year into 401k which can then be converted to Roth.
      Aug 16, 2019
    • Microsoft techladki
      Yeah talking of what you can. Do in addition to that
      Aug 16, 2019
  • Microsoft / Eng
    bubbly123

    Microsoft Eng

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