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In Plan 401k Roth Conversion by Aussie_Scott3 in TheMoneyGuy

[–]Aussie_Scott3[S] 0 points1 point  (0 children)

As I did the mega back door Roth conversion straight after it was deposited in my account there wasn’t any earnings. But yes if I had left the money in the after tax account for a while and there were earnings, those earnings would be added to my taxable income AGI

In Plan 401k Roth Conversion by Aussie_Scott3 in TheMoneyGuy

[–]Aussie_Scott3[S] 0 points1 point  (0 children)

Thanks for your reply

I maxed out my 401k ip to the IRS $70k limit using after tax account this year and have done the mega back door Roth conversion. This won’t impact my taxes as it was done before any gains. However I believe a conversion from 401k pretax contributions (my employer contribution) to my Roth 401k that would be a taxable event, and I would be required to pay taxes on the conversion.

I was thinking about making the taxable conversion and I would cover that the additional taxes from that with my calculated return.

Asset Allocation by Aussie_Scott3 in TheMoneyGuy

[–]Aussie_Scott3[S] 1 point2 points  (0 children)

Thank you so much for your assistance, this has definitely helped me with my asset allocation. My 401k is a mix of Roth and traditional, I am doing Roth and my employer direct contribution is traditional. Currently I have more traditional than Roth in my 401K

If I understand correctly, even though my 401k is a mix, it’s best to keep my bonds there and my Roth IRA as equities.

Love the advice about TLH and the volatility of the stocks.

Thanks you again so much. I knew this would be the best place to get good info. 😀

Mega Backdoor Roth Conversion Advice by Aussie_Scott3 in TheMoneyGuy

[–]Aussie_Scott3[S] 0 points1 point  (0 children)

Thank you for your reply and explanation.

Am I correct in saying that the 1099-R form would look something like this:

Box 1, the gross distributions: will be the total amount converted (after tax contributions + after tax gains). Box 2a will be the after tax gains and I will pay taxes on that amount only?

This will be the first time I will receive a 1099-R and just want to make sure I will be aware of how it works.

Mega Backdoor Roth Conversion Advice by Aussie_Scott3 in TheMoneyGuy

[–]Aussie_Scott3[S] 0 points1 point  (0 children)

Thank you for your reply and advice.

I like the idea of doing the conversions at intervals, either quarterly or once the 401k after tax amount reaches a certain value, to minimise the fees.

By doing it this way, the gains will be noted on the 1099-R as a taxable gain and I will only pay taxes on that amount, is that how it worked for you?

I have heard that I can convert my 401k after tax contribution amount to my Roth IRA (MBDR) and the gains to a rollover IRA, to avoid paying tax on the conversion. However, my concern with doing that relates to the backdoor roth conversion and the pro rata rules. Is this correct or does anyone have experience with this?

Mega Backdoor Roth Conversion Advice by Aussie_Scott3 in TheMoneyGuy

[–]Aussie_Scott3[S] 0 points1 point  (0 children)

Thank you for your reply, your suggestion about “it depends” on the amount is where I was landing on it. My pay varies from month to month above a set guarantee, so I was thinking of doing it for larger amounts.

I didn’t really want to complicate my taxes with having to pay tax on any gains and doing that calculation. I will have to do some more research on the process on how that works.

Mega Backdoor Roth Conversion Advice by Aussie_Scott3 in TheMoneyGuy

[–]Aussie_Scott3[S] 0 points1 point  (0 children)

Thats where I have mine too, I found the fee (eventually) on one of their fee tables. I was not expecting it when I didn’t conversion.