What to do after contributing to pre-tax 401k?

Nov 17, 2018 28 Comments

Finance noob here. I started work in august and hit my 18.5k limit for my traditional 401k recently. We use fidelity and I opened a Vanguard Roth ira recently but have no idea what to do next. Do I just contribute a set percentage to after-tax on fidelity and roll over to vanguard? And how do I mega back door Roth ira? Also do I start contributing to traditional 401k starting January 2019? sorry I have no idea what I'm doing...

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TOP 28 Comments
  • Microsoft / Eng
    bebK16

    Go to company page Microsoft Eng

    bebK16
    If you're under the Roth IRA contribution limit, get your $5.5k ($6k next year) in that. If you're over there limit, do a backdoor Roth. Then if you can still save more, do post-tax contributions to your 401k and then call Fidelity periodically (quarterly, or however often your plan allows) and tell them you want to convert to Roth 401k. You might even have the option to do the conversion automatically (Microsoft has that option with Fidelity, for example).

    Backdoor Roth and Megabackdoor are two separate concepts, and you should take advantage of both if you can.
    Nov 17, 2018 7
    • Microsoft / Eng
      bebK16

      Go to company page Microsoft Eng

      bebK16
      That's why you maximize pretax contributions, and then use the after tax mega backdoor contributions and backdoor Roth IRA contributions to fill in your after tax buckets.
      Nov 17, 2018
    • New
      TruIdiot

      New

      TruIdiot
      Oh fuck. How did I not know about this for 10yrs. Thanks bebK16. Will implement this for rest of my life 🙂
      Nov 17, 2018
  • Facebook / Eng
    Ccdz88

    Go to company page Facebook Eng

    Ccdz88
    You can contribute up to 25k after tax which gets auto converted to Roth contributions in Facebook's 401k.
    Nov 17, 2018 0
  • Spotify / Eng
    Aw74s1

    Go to company page Spotify Eng

    Aw74s1
    Contribute to your HSA if you have one. It's basically a third retirement account
    Nov 17, 2018 4
  • Workday
    frauburger

    Go to company page Workday

    frauburger
    Open an E*TRADE account and invest after-tax money in individual stocks. 401ks are great for the match but they limit you to certain funds. Think of E*TRADE as mid-long term savings in addition to retirement.
    Nov 18, 2018 3
  • Yes in January 2019 your limits reset so you can again contribute 18.5k to your traditional 401k (as well as 5.5k to IRAs and any after-tax 401k allowed by your plan)
    Nov 18, 2018 1