Not working at IBM anymore. Can someone please explain me the difference between an after tax contribution to Roth IRA v/s converting the same to a Roth 401K. Pros and Cons of each please ? #401k
I think you misunderstood mega backdoor IRA. Typically you can directly contribute 6k into your traditional/ Roth IRA per year (depends on your income level and age). Mega backdoor Roth allows you to contribute additional 37.5k per year to your Roth IRA (again, depends on your age and employer contributions). To execute, you need to have your employers 401k plan allows both in service withdraw and Roth 401k option. Simply contribute additional money into your Roth 401k account, then do a Roth convertion to your IRA (just talk with your brokage and they will know how to execute) and you are ready to invest these potion of money however you want tax free when you retired. If you just want to know the difference between Roth 401k and Roth IRA. It's simply the choice of investments. Usually 401k has less options to invest while ira you can pick your own stock, bond, ETF, funds...etc. They are both taxed when you contribute the money and tax free on both the contributions and the gains (given you reached the age of retirement)
You’ve got some of it wrong. It only works if your employer allows after tax 401k contribution, not Roth 401k.
I see, good point. Thanks for correcting it!👍
All things Roth are after-taxes. Any type of 401(k) account is provided by your company. You can open IRA accounts by yourself through brokerage firms. P.S. No need to mention you don't work at IBM how is that even relevant to your question. No one is judging you or your past.
Relevant coz IBM doesn’t offer mega backdoor Roth.
IBM does offer after tax 401K contributions you are wrong