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.

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TOP 31 Comments
  • I wrote this up back in 2017. How to do the Mega backdoor Roth at Microsoft into your personal Roth IRA. If you don’t already have a personal Roth IRA.
    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!
    Jan 5, 2019 12
  • Microsoft
    Sharkweek

    Go to company page Microsoft

    BIO
    I print money.
    Sharkweek
    Sounds kinky.
    Jan 5, 2019 0
  • Microsoft / Eng
    Harmar

    Go to company page Microsoft Eng

    Harmar
    If you want the least hassle, go to the contributions page and check the auto-convert AT to Roth quarterly option. Done. The funds will stay in your 401k, but be classified as Roth after conversion.

    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).
    Jan 5, 2019 4
    • Microsoft / Eng
      Harmar

      Go to company page Microsoft Eng

      Harmar
      Sure, there are many factors. On the flip side, keeping it in the 401k offers access to Microsoft negotiated funds with extremely low expense ratios. Better than you're likely to get in an external IRA.

      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.
      Jan 6, 2019
    • Yes very well said and you make some great and fair points. Thank you so much for sharing your tips. They were very helpful.
      Jan 6, 2019
  • Intuit
    gyrshj

    Go to company page Intuit

    gyrshj
    Sorry guys, despite googling multiple sites I still don’t understand why mega Backdoor is so good, I need tax shelter but if I pay tax upfront what’s the point
    Jan 6, 2019 4
  • Msft has options to do this automatically per quarter. Go to NetBenefits , set some % for option “after tax” , you should see option for automatically roll over per quarter. Just make sure to look for tax form in the end to file this ( you might incur some taxes if you made some profit in a quarter before roll over could happen ) . Also filing taxes ensures that IRS knows that this Roth money now so it won’t be taxed on growth. Unfortunately turbo tax doesn’t suck up this form automatically. I have posted last year how to access that form towards the end of the year. It’s pretty easy, don’t be afraid of the steps. If you can afford it, it’s the best investment for retirement and for nested egg for generations to come.
    Jan 5, 2019 1