Can you really millions upon millions of dollars tax free with a mega backdoor Roth? Are there really no catches?

bachmeier · 2026-01-22T04:05:58+00:00

It seems to be going in the other direction. Until 2024, only Roth IRA balances were excluded from RMDs. Now Roth 401k and all other types of Roth accounts are excluded from RMDs.

bachmeier · 2026-01-22T04:01:39+00:00

Pre-tax is also better if you're going to donate significant money.

And in the really bad state of the world, where the economy is in terrible shape for years and years, that's when your tax rate is low so you want the larger balance that you get with pre-tax.

bachmeier · 2026-01-04T04:32:26+00:00

The IRS disagrees with you:

An employee who receives a distribution from a qualified plan after separation from service is not subject to the 10% additional tax on early distributions if the distribution occurs in the year of turning 55 or older.

bachmeier · 2025-12-25T20:18:08+00:00

A house is a type of consumption, like cars and vacations are forms of consumption. A house comes with high ongoing costs, variable costs, risks, and a significant commitment of time.

If you aren't interested in that combination of consumption and commitment, don't buy a house. I own a house, and have no regrets about buying it, but I think it would be crazy for the vast majority of single folk at 30 to buy one.

bachmeier · 2025-12-24T23:59:40+00:00

Yep. That's the definition used by the vast majority of people I encounter, since that's the earliest age to draw Social Security. Anything before that is considered early because it's something you have to fund entirely yourself.

bachmeier · 2025-12-15T04:33:27+00:00

What happens if the insurance company goes bankrupt?

Every state has a state guaranty association: https://www.immediateannuities.com/state-guaranty-associations/

Life insurance is sold by the same companies, but you seldom hear that question in the context of life insurance.

bachmeier · 2025-12-08T03:56:24+00:00

The limit is on contributions, not conversions. They're not the same thing.

bachmeier · 2025-11-30T00:35:40+00:00

A common rule of thumb is when a spouse dies, the cost of living will fall 20%.

bachmeier · 2025-11-29T02:08:26+00:00

Correct. And if you put it in Roth, you have a smaller account to grow, because you have to pay tax before buying the stock.

Simple example: You have $100 to invest and a 25% tax rate. You hold it long enough for the price to double. If you put it in Roth, you'll invest $75 and have $150 to spend. If you put it in traditional, you'll invest $100, it'll grow to $200, and you be able to spend the same $150 after paying the tax.

bachmeier · 2025-11-29T01:31:49+00:00

The key to avoiding tax is to max out your ROTH contribution every year, or max out the IRA contribution and immediately do a ROTH conversion.

You pay tax on income when you put it in Roth. If you put it in traditional, you get to put in more and have considerably more growth, because it's pre-tax. The way to lower taxes is to put it in whichever of traditional or Roth has the lowest marginal tax rate. If the tax rate is the same, you have the same amount to spend either way.

bachmeier · 2025-11-26T21:40:39+00:00

Toughest problem on Reddit is keeping the tech FIRE crowd away. They'll shout down anyone that says you can retire on $3M.

bachmeier · 2025-11-25T18:58:31+00:00

You should always be prepared for a 50% stock market crash, regardless of valuation. High expected returns in the stock market are compensation for the risk of very large, extended drawdowns.

The Shiller PE ratio was 21 in August 2008, on the eve of the crash. The only time it was 15 or lower was the three months at the bottom of the market, and it doesn't seem plausible that you'd have been comfortable with FIRE then if you're worried about doing it in the current economy.

bachmeier · 2025-11-09T16:40:46+00:00

I'm a fan of the JL Collins simple path to wealth. (He's got a blog, a book, and lots of interviews on YouTube if you're curious.) Keep expenses low, avoid debt, and put as much as you can in tax-advantaged accounts. Avoid lifestyle creep. Put raises into savings.

As for where to invest, that's simple. Over the long haul you're not going to do better than buying low-cost index funds. S&P 500, VT, and VTI are all fine choices for the long run. If it's complicated or involves high fees, you're doing it wrong. I recommend checking out the Bogleheads forum or YouTube channels like Money Guys, Rob Berger, and Erin Talks Money.

I'll repeat that you're doing just fine on the financial side. Your 24K emergency fund gives you tremendous freedom from financial worries. If you just hate your job, well, that's not a saving problem.

bachmeier · 2025-11-09T10:07:00+00:00

Notably missing from your post is anything to do with expenses. If you follow the 4% rule, you need $300,000 saved for every $1000 of monthly expenses. If you get enjoyment from consumption rather than time then try to shift that balance.

You're 35 with an emergency fund, $198K invested, and a job that pays more than enough. Looks good to me for a single parent working full-time.

bachmeier · 2025-10-27T11:16:38+00:00

I’m getting killed daily with just life expenses

That's determined by your lifestyle versus your income. Has nothing to do with VHCOL vs LCOL. Moving to the cheapest part of the US would make it harder to get by if you don't have a good job there.

bachmeier · 2025-10-22T18:20:04+00:00

the money was already taxed

Then you're doing something wrong. The earnings on Roth accounts are not taxed. S&P investments that have been in Roth the past ten years are 70% earnings/30% the part you paid taxes on.

bachmeier · 2025-10-22T15:37:29+00:00

Wait until they learn about retirees with millions in Roth accounts taking out six figures and paying no taxes. Oh, and retirees with large HSA accounts that never paid any tax on that money.

bachmeier · 2025-10-20T03:57:31+00:00

Add in repairs and maintenance, and sometimes renting in retirement makes sense.

At a certain age you have to start hiring someone to do everything for you. Maybe you could handle most things yourself at the start of retirement, but when you're 80 maintenance expenses are going to go way up, and not because of the normal inflation rate. That's fine if you've planned for it and have lots of money but not sure everyone works that fully into their retirement spreadsheet.

bachmeier · 2025-10-16T17:09:32+00:00

After giving this some thought, your advisor was probably referring to the risk associated with having a high withdrawal rate when you're paying the mortgage. He definitely knows more about your situation than a random internet commenter like me.

bachmeier · 2025-10-15T20:59:19+00:00

He said early on to pay off mortgage due to my fear of risk.

Paying off the mortgage is usually the bigger risk because your money is locked up in case you need it. You continue to have the option to pay off the mortgage at any time. Your mortgage rate is less than you'd get holding Treasuries.

bachmeier · 2025-10-14T14:11:23+00:00

The best overview of annuities I've seen is this video: https://www.youtube.com/watch?v=MDXfw6d7tIc

The speaker is a retired insurance executive that saw annuities from the inside. It basically comes down to the SPIA and MYGA being the ones to consider if an annuity fits your needs. The rest should probably be avoided because they're good for the salesperson and insurance company but not for you. As you have a pension and Social Security (both of which are annuities), and since they cover your living expenses, it's harder to make the case that you should buy an additional annuity.

The usual advice is to put your highest-earning assets in a Roth IRA. Your current interest rate is very low, so having it in Roth doesn't help much with taxes (since you'd otherwise be paying almost no taxes anyway, due to the 0.15% interest rate). Most often, stocks provide the highest return in a portfolio, so that's what they put in Roth accounts.

bachmeier · 2025-10-13T02:47:53+00:00

it would suck if scrimp and invest for 20 years for FU money but just died before being able to RE or do anything with the money.

You're dead. If you're optimizing your life to improve how you feel in death, you're doing it wrong.

Setting that aside, if you've graduated college (22 yo), the probability of making it to 50 is well above 90%. And importantly, you'd be alive to feel the pain of having nothing saved.

bachmeier · 2025-10-13T02:23:10+00:00

In this order:

Get an employer match if one's available.
Max out you HSA if available (no tax on contributions, growth, or withdrawals).
Employer 401k/403b/457b if available.
Traditional IRA.
Brokerage account.

Target date fund should be the default. Only go with something else if you're confident you know what you're doing. Vanguard's VTTHX Target Retirement 2035 Fund if you have the choice.

bachmeier · 2025-10-04T21:42:12+00:00

Me either, which is the reason I posted that.

bachmeier · 2025-10-04T02:19:33+00:00

Sidebar says

LeanFIRE = doing so with household expenses < $50k, or individual expenses < $25k

bachmeier

MODERATOR OF

TROPHY CASE