Mega backdoor from Microsoft 401k in fidelity ?
Jan 5, 2019
31 Comments
I need some help. I want to set up Mega backdoor. I called Fidelity yesterday and the agent didn’t understand it and didn’t know how I can set it up. I tried to explain it to her but it was in vain. Can anyone who has successfully set it up in Fidelity share their experience and tips step by step ? After reading some posts, I understand that there is an option to do auto rollover from 401K to Roth 401K but we couldn’t find it.
comments
1. Login at fidelity.com
2. At the very top navigation click the “Open an account” link.
3. Click the “Open a Roth IRA” button and go through the process to create a personal Roth IRA. It only takes a couple minutes.
Now that you have your personal Roth IRA, you’re ready to fund it through the mega backdoor process.
1. Login at 401k.com
2. In the ‘Investment Accounts’ section note your Individual trading account and your newly created Roth IRA account.
3. Click on your “Microsoft 401K Plan”
4. Go to Contributions, increase your AFTER-TAX contribution amount to your desired percentage.
5. Click the “Change Contribution Amount” button to confirm your new after-tax allocation.
Now for the mega backdoor procedure. The day after each payday call fidelity to transfer from your 401k after-tax to your (out of plan) personal Roth IRA that you created.
1. Call Fidelity at 1-888-810-6738.
2. Enter your account SSN followed by #.
3. Enter your account Password followed by #.
4. Take the “401k” option.
5. Take the “Fund Transfer” option.
6. At this point say “Representative” to talk to a live person. Unfortunately, occasionally it’s someone from India. Just keeping voting for Trump to fix this crap. #MAGA
7. Tell the person, hopefully an American, you want to “transfer your after-tax 401k contribution to your personal Roth IRA”.
8. That should do it. They’ll ask you if you accept any taxes and will confirm your personal Roth IRA account number by the last four digits.
I do this process every day after payday. You need to fund your Roth IRA with at least $2500 before you can invest in the totally bomb Fidelity’s Spartan funds.
Good luck!
You don't have to set up a new account, your existing investment elections will apply to the Roth funds, and you'll just get a 1099 at the end of the year (you might owe a few bucks on the conversions, but it's generally pretty negligible).
I maintain that the auto-convert is the least hassle option, and it's not a bad one. There are valid reasons to choose otherwise, but you're not making a mistake if you go that route.
https://fairmark.com/retirement/roth-accounts/roth-distributions/distributions-after-a-roth-ira-conversion/