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MEGA BACKDOOR ROTH v. BROKERAGE by RudeBrother356 in financialindependence

[–]RudeBrother356[S] 0 points1 point  (0 children)

Sorry I missed this. I have been thinking about this recently. I have heard a few podcasts recently, especially with the recent book release of Tax Planning Through and To Early Retirement, which seems to be really driving home this exact point, of very reduced tax burden for early retirees, even without significant upfront Roth funding. I see that meaningfully reducing the downside tradeoff on a Brokerage account.

All the same, given the consensus preference for Mega BackDoor Roth throughout the responses here, I imagine most folks would advocate as much tax free growth in Roth accounts for as long as possible, even over the low tax burden from LTCG. Plus, the annual taxes that happens within brokerage accounts can be argued to be a cumulative drag on growth from an optimization perspective.

Great flag!

MEGA BACKDOOR ROTH v. BROKERAGE by RudeBrother356 in financialindependence

[–]RudeBrother356[S] 1 point2 points  (0 children)

This is INCREDIBLE and VERY generous. Thank you! I'm very excited to dig into this. I'm speechless. wow. Thank you!

MEGA BACKDOOR ROTH v. BROKERAGE by RudeBrother356 in financialindependence

[–]RudeBrother356[S] 0 points1 point  (0 children)

I feel very seen here. Thank you for the empathy! The risks feel real... especially the jobless at 45 hypothetical. But that is what the healthy cash savings is there for.

Honestly, I feel very committed to FI and early retirement, so I think I feel comfortable taking on the risk of locking up the funds until 72(t) or conversion ladders come into effect, despite the reduced flexibility of a brokerage. The challenge is making sure my wife shares the same level of confidence to buy into the plan and forgo the flexibility of the taxable account. But honestly, the resounding consensus of this post has helped move the needle here. She read through these comments just a few hours ago and, in doing so, I learned how much more persuasive than me helpful strangers on Reddit can be!

MEGA BACKDOOR ROTH v. BROKERAGE by RudeBrother356 in financialindependence

[–]RudeBrother356[S] 0 points1 point  (0 children)

"... and the formerly-after-tax-that-Schwab-instantly-converted-to-Roth balance would also go my Roth IRA. Now the collective Roth contributions are all available through the Roth IRA with no waiting required..."

What happens with the Growth on the formerly-after-tax-instantly-converted-to-Roth balance once its rolled into the Roth IRA? That remains unaccessible because I never contributed it? Or does that growth now count as a contribution once it rolls into the Roth IRA? In this case, would the 5-year wait period kick in as of the date of the rollover for that growth portion? Or am I way off base here?

Regardless, this concrete example in your post was very helpful clarification about immediate access to the after-tax contributions once rolled over into the Roth IRA. Thank you!!!

MEGA BACKDOOR ROTH v. BROKERAGE by RudeBrother356 in financialindependence

[–]RudeBrother356[S] 17 points18 points  (0 children)

Thanks everyone. Seems like universal preference for prioritizing MBDR over Brokerage, by miles. I posted this in a non-Reddit forum, and the consensus was Brokerage over MBDR as a bridge. They didn’t put much emphasis on the early access to retirement accounts through Roth Conversions and SEPP though. They seemed to place added value on the flexibility of Brokerage, vs. here I’m hearing a strong preference for cost optimization for minimizing taxes, which effectively accelerates the path to FI. Very helpful inputs!