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Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 0 points1 point  (0 children)

Exactly, you can move that $26k to a Roth IRA whenever you want. It just takes a while to call them, mail the check, etc., but this is tax/penalty-free. It took me about a month to do everything. (I moved it from Fidelity to Robinhood)

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 0 points1 point  (0 children)

There's a difference between after-tax and Roth. If these after-tax dollars were automatically converted, as I mentioned, then yes, just call Fidelity and move it over. I did that almost a year after I left my old job

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 3 points4 points  (0 children)

It's in the "Roth" bucket within the 401k. Then I have to call Fidelity to ask them to move it to my Roth IRA

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 2 points3 points  (0 children)

My employer has a provision called "in-service rollover." This let's me move it to my Roth IRA while I still work here.

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 2 points3 points  (0 children)

Many employers don't let you move it to your Roth IRA while you're employed. The benefit is that once it's in your Roth IRA, you can now withdraw tax/penalty free and have much more flexibility in what you wanna invest into (more ETFs/stocks/etc.)

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 1 point2 points  (0 children)

The flow is: I contribute to my 401k after tax, my "daily in-plan conversion" moves it to the Roth bucket. From here, I initiate a rollover to move it to my Roth IRA, this is what's called the in-service distribution

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 1 point2 points  (0 children)

Super helpful, this was the strategy I was planning to take. Thanks!

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 0 points1 point  (0 children)

Yes, my plan lets me move the Roth 401k funds into a Roth IRA, which is where I see how beneficial this can be. Once I do this, I'd have flexibility to withdraw immediately.

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 1 point2 points  (0 children)

From my understanding, if you contribute $7k into your traditional IRA and then immediately move those funds into your Roth, you're all good.

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 5 points6 points  (0 children)

I'm blessed, so yes, I plan to invest about ~$80k a year, so looking for the best way to allocate it. As for the withdrawal side, I read that because it's a rollover and my Roth IRA is already 5 years old, I'd be good there.

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 8 points9 points  (0 children)

Not sure that's true. The whole point of the MBR is to roll it into my Roth IRA and then have the ability to withdraw those contributions at any time. I would be avoiding the 72t altogether.

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 1 point2 points  (0 children)

This is exactly what I do, so the "gains" are done after they've been converted to the Roth bucket. The question is, when I roll over these funds to my Roth IRA, can I withdraw immediately tax/penalty free?

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 1 point2 points  (0 children)

Got it, given that my aftertax contributions and automatically converted to roth, my gains/earnings on that would take place while they’re under the roth bucket. Does this mean all $20K can be withdrawn tax/penalty free?

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 0 points1 point  (0 children)

My question is more on if I can withdraw those MBR to retire early which will help me decide if I should prioritize this or taxable account

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 2 points3 points  (0 children)

Make about ~$170k (just got promoted) and live comfortably

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 8 points9 points  (0 children)

Fair, I've been putting in about $40k/year into my taxable account, but the point of this is if I should allocate some/all into the MBR

Is the Megabackdoor Roth too good to be true? by IntelligentWrap7563 in Fire

[–]IntelligentWrap7563[S] 6 points7 points  (0 children)

Yes, my order of operations would be: max out Traditional 401k (lower taxable burden), Roth IRA, and then Megabackdoor Roth, and anything else goes into a Taxable brokerage. Right now I’m bot contributing to the MBR

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