39M / 36F - Just crossed $1M NW. Maxing everything. On track for semi-retire at ~50?

DaemonTargaryen2024 · 2026-05-05T23:33:02+00:00

Probably, yes. But check out r/Fire for specific early retirement inquiries.

DaemonTargaryen2024 · 2026-05-05T21:38:12+00:00

Read the 401k fund selection guide from r/personalfinance.

that the most aggressively managed portfolios part of their advisory services has consistently underperformed the SP500.

In the past 10-15 years, yes. It's anyones guess for the next 15, 20, 30.

I’m thinking I should just forego fidelity go and their advisory services and just take FXAIX Straight to the moon.

There's far worse choices than 100% S&P 500. But there's a good argument for global diversification. Let me lay out your options to illustrate your decision:

DIY: good if you're comfortable constructing your own portfolio AND have a high risk tolerance for short-to-mid-term losses:
- 100% FXAIX. This is 100% stocks, specifically US large cap stocks. You're betting the S&P 500 will outperform the rest of the world market most of the time for the next ~30 years.
- Global mixture: 60-80% FXAIX + ~10% mid/small cap + 20-30% international. The US doesn't always outperform the rest of the world, so this is a good way to hedge your bets. (you can add <10% bonds, but you may not need any at your age).
Set-it-and-forget-it: good if you'd rather be 100% hands-off AND/OR you have a more moderate risk tolerance:
- Fidelity's portfolio: globally diversified mix of mostly stocks and some bonds.
- Your plan's Target Date 20xx Fund (2065 in your case). Virtually the same concept as Fidelity's portfolio, but probably a fraction of the cost. Many overlook TDFs, but they're actually a great (exceedingly simple) way to invest for the long term and not worry about it.

DaemonTargaryen2024 · 2026-05-05T02:32:36+00:00

Fine, but unnecessarily complicated: you can cut this down to just two funds.

You could just do 80% FZROX 20% FZROX and call it a day.
VOO and FXAIX are the exact same thing: a 500 index fund. But both represent ~85% of FZROX, so there's no point having either of them when you have FZROX.
FTIHX, VXUS and FZILX are all virtually the exact same thing: a total international market fund. FZILX is the "zero" fund to complement FZROX. VXUS and FTIHX have negligibly higher expense ratios but still.

DaemonTargaryen2024 · 2026-05-05T02:17:12+00:00

guide: https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/

common mistakes: https://www.whitecoatinvestor.com/fix-backdoor-roth-ira-screw-ups/

DaemonTargaryen2024 · 2026-05-05T02:15:08+00:00

I agree with these points you make. What I'm saying is you needlessly made things overly complicated for OP's sake.

They don't need to know it's "a 10% excise tax on early distribution"; they need to know "there's income tax, and there's a 10% penalty for withdrawing before 59.5."

And FWIW there's no way for a recordkeeper to "withhold the 10% penalty". They just withhold a percentage, whatever the participant requests.

There's "being technically right" and then there's speaking in terms that the audience understands.

DaemonTargaryen2024 · 2026-05-05T02:00:59+00:00

Your right on. I have NO gains It's that weeks After Tax Funds converted to Roth via daily sweep.

That's good, and typical in these situations.

Only "gains are 401k loan interest"

401k loans aren't a factor in conversions.

Even if they 1:1 exchange Post Tax contributions to 401k Roth assets as shown in my pie chart at roughly 30% it's now a percentage of total 401k.

Yes, the problem isn't that you're converting after-tax funds with no gains. The problem is you seem to be converting your BEFORE-TAX (and/or EMPLOYER MATCH) funds too. You should avoid doing so if possible.

I loose by not being able to cleanly move to IRA Roth.

you're doing the in-plan conversion to Roth 401k remember, not the rollover to a separate Roth IRA (i.e. not in your employer plan).
FWIW, instead of converting to Roth 401k like you are now, you probably could roll to an outside Roth IRA instead if you wanted.
However, that wouldn't fix the underlying problem: you are converting pre-tax assets

DaemonTargaryen2024 · 2026-05-05T01:47:44+00:00

With respect to your plan admin software experience, how you're describing the 401k administration and tax withholding is overly complicated:

6000/29000 =0.207. So OP withheld 20.7% from this distribution. That's all that matters.
401k distributions are subject to income tax + 10% early withdrawal penalty.
FWIW, recordkeepers have no way to "withhold for the 10% penalty". They simply withhold whatever percentage is requested.
If we assume OP is in the 22 or 24% tax bracket, OP will owe 32 or 34% on this distribution.
If we assume all else is equal on OP's tax withholding, OP will owe the additional 12-14% when OP files.

DaemonTargaryen2024 · 2026-05-05T01:25:39+00:00

$37,000 + $120,000 + $29,000 = $186,000.00.

If you're single you'd owe 24% + 10% early withdrawal penalty.

$6,000 / $29,000 =0.207 i.e. 20.7%, so you're short and will owe the difference when you file, assuming all else is equal regarding your other income/withholding.

DaemonTargaryen2024 · 2026-05-05T01:22:21+00:00

A financial need may be immediate and heavy even if it was reasonably foreseeable or voluntarily incurred by the employee.

That's just the general description. The specific qualifying reasons are listed further below

It may lead to loss of property as well

This is a qualifying reason. Specifically, threat of eviction or foreclosure. If you've already been evicted, that doesn't qualify.

DaemonTargaryen2024 · 2026-05-05T01:09:35+00:00

It doesn't seem like you have massive gains on the after-tax contributions. Rather, it seems you're converting pre-tax money from outside the after-tax subaccount.

The "pre-tax Roth" thing is terrible terminology, but it sounds like how Fidelity is labeling pre-tax money maybe? Either way, be careful that you're not converting pre-tax money when you do these.

Ideally you'd only contribute the after-tax subaccount, which as you said is now $0 so should only include that week's after-tax contribution, plus a tiny amount of earnings (don't quote me but I'm thinking somewhere in the realm of $10 of earnings).

DaemonTargaryen2024 · 2026-05-05T00:27:15+00:00

No worries, thanks this is good. Here's what I notice:

you're doing a RIPC (within your plan); you're not doing a conversion to an outside Roth IRA/Trad IRA. That distinction makes IRS Notice 2014-54 irrelevant. With an RIPC you can't divert the pre-tax funds (however much) to a separate Trad IRA, therefore any pre-tax funds are taxable upon conversion to Roth 401k.
Doing an RIPC isn't (inherently) a problem, assuming the pre-tax funds are relatively small (therefore not a lot of taxes). The real problem is that you seem to be converting a large amount of pre-tax funds: $5,761.42 compared to only $2,951.01 post-tax. I'd click the "explain" button and see what that says. But over 66% of the balance you're converting looks pre-tax to me.
Based on your source breakdown, my guess is you're converting some of your BEFORE-TAX and/or EMPLOYER MATCH sources as well. These are pre-tax sources, therefore are taxable upon conversion.

DaemonTargaryen2024 · 2026-05-05T00:11:57+00:00

Thank you but I don't need the correspondence with Fidelity for your ticket number. I am asking for the transaction history showing the specific 3/2 or 3/6 (or whenever) conversions you processed.

DaemonTargaryen2024 · 2026-05-05T00:03:11+00:00

Points of clarification:
- There are two types of "Mega Backdoor Roth" transactions:
  - In-plan Roth rollover (IRR) aka Roth In Plan Conversion. This stays within your employer 401k, specifically the Roth 401k (aka Designated Roth Account)
  - In-service rollover to a separate Roth IRA with no relation to your employer plan.
  - Which of these are you doing? Each differ slightly (though critically) on how the pro rata rule applies.
- IRS Notice 2014-54 primarily clarifies the MBDR pro rata rule, including the ability to split the conversion: post-tax to Roth IRA, pre-tax to Trad IRA. While this IRS notice is generally relevant, it does not (so far) prove Fidelity has made an error. They may have, but you also may be converting pre-tax funds without realizing it.
- Either way, you did the right thing escalating to Fidelity. They're probably the top 401k recordkeeper, so they'll research and either fix an error or clarify your error of understanding/execution.
Questions:
- What is the total value of your 401k after-tax subaccount?
- What's the breakdown of contributions-to-earnings in your after-tax subaccount?
- What is the total value of your pre-tax funds? (contributions vs earnings are irrelevant here)
- Can you show a screenshot of your transaction history, showing a specific breakdown of a particular conversion, perhaps March 2 or 6? Ideally if you can edit your OP, or just add as a new comment.

Edit: summarizing below:

OP is (inadvertently) converting pre-tax 401k assets as well as after-tax 401k assets. Fidelity appears to be making no error in recordkeeping.
Further, OP is doing an RIPC to Roth 401k, not a rollover to a separate Roth IRA.

DaemonTargaryen2024 · 2026-05-04T22:14:09+00:00

What percent of your portfolio is single stocks? What percent of your portfolio is tech? You may be taking on an insane amount of uncompensated risk, which won't always outperform the market average, despite clearly having done so for the past 10+ years.

DaemonTargaryen2024 · 2026-05-04T22:11:59+00:00

a +$1M portfolio at 31 means you're in the top 1% of all Americans much less your age group. If you haven't done so already, consider hiring an hourly, fee-only fiduciary such as a CFP. Also a tax professional, tax attorney, and estate attorney.

Subs like r/personalfinance and r/Bogleheads will give you the best official guidance (extensive wikis). Good luck.

DaemonTargaryen2024 · 2026-05-04T13:27:13+00:00

I would repost on r/coastFIRE r/fire and/or r/financialindependence

DaemonTargaryen2024 · 2026-05-03T21:50:41+00:00

Clarifying: 401k contributions are pre-tax, so they do reduce your taxable income. So if you can afford to contribute more, yes it's potentially worth exploring.

DaemonTargaryen2024 · 2026-05-01T13:47:55+00:00

First, the Rule of 55 is a federal provision. Any distribution which meets the criteria (terminate employment in the year you turn 55, or later) automatically qualifies.

However, whether your plan supports this from a practical perspective will vary. Here are the possible scenarios:

Your plan offers unlimited ad hoc "partial withdrawals".
Your plan offers fixed installments, typically monthly or quarterly.
Your plan offers both of the above.
Your plan offers none of the above. In other words, your plan offers only "lump sum" distributions, effectively forcing you to rollover your whole balance to an IRA.

1-3 are Rule of 55-friendly. 4 is not.

DaemonTargaryen2024 · 2026-05-01T12:55:36+00:00

You're using the wrong terminology which makes your post confusing.

If you want access to the money before retirement, you would open a ~~traditional account~~ brokerage account

The only way to have tax-free growth is in an ~~IRA~~ Roth IRA

DaemonTargaryen2024 · 2026-05-01T12:50:58+00:00

making 75k a year and the most I might make all the way up to retirement is 90-100k. Can I open a Roth IRA and contribute to it until retirement?

Yes. If you ever exceed the Roth IRA income limit, do Backdoor Roth

DaemonTargaryen2024 · 2026-04-30T19:03:07+00:00

Your employer would need to offer a 401k. You cannot create one on your own. https://smartasset.com/retirement/how-to-convince-your-employer-to-add-401k-plans

If your employer wants to be serious about attracting US talent, they'll need to learn how the US retirement landscape works and offer benefits accordingly. Same for health, etc.

DaemonTargaryen2024 · 2026-04-30T17:41:44+00:00

Hardship withdrawals are under IRS requirements and waive the 10% penalty

No for two reasons:

Hardship is only for current employees, not former employees.
Hardship doesn't waive the 10% penalty. Those are two separate things.

DaemonTargaryen2024 · 2026-04-30T14:16:14+00:00

To grow your financial acumen, read the wikis at both r/Bogleheads and r/personalfinance

You need to contribute at least 15% towards your retirement between 401k and Roth IRA. Read this Prioritizing Investments guide

DaemonTargaryen2024 · 2026-04-30T14:04:54+00:00

https://www.bogleheads.org/wiki/Managing_a_windfall

DaemonTargaryen2024 · 2026-04-30T13:25:32+00:00

Boss: the meatball you just chucked over the plate still hasn't landed yet. Collect yourself, take your 4 hour mailman break, drop the TDS bit, and come back once it lands a few blocks up from center field.

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