Backdoor Roth IRA EXPLAINED (how to do it step by step) 

🤝 appreciate you!

Scott Edward - Real Estate - Thanks, Scott! Appreciate you and the feedback. Yeah, Backdoor Roth is fun to discuss, but for some reason people don’t usually discuss how to actually do it. That Aggregate Rule can be a real pain once discovered. Thank you for taking the time!

Consider contributing to Roth TSP instead of all traditional TSP.

@Nathan Foster - I stand corrected...thank you! Yes, you are correct...a if you’re married and make more than $12k you can contribute into either Roth or Trad IRA on behalf of your spouse. Here’s a link to Investopedia for anyone else that reads this to learn more: www.investopedia.com/what-is-a-spousal-roth-ira-4770888 Appreciate you taking the time to check out the video and for holding me accountable...thanks boss!

Unorthodox Savings - Thank you for the positive encouragement! As with life and finances, constantly trying to improve those editing skills. It’s a work in progress. Hahaha. Appreciate you!

@Urvik Upadhyay - Thank you for that feedback & yes I hope you're able to make time to watch a few more. Check out the Tax Bracket Management one...wasn't terribly popular with the algorithm, but it is one of my favorite videos I've published. Doing a rollover from pre tax 401k to your Trad IRA isn't a bad move...quite a few people do it, but yeah it does eat into doing the backdoor Roth strategy a bit. However, if you're not maxing out your 401k at $19,500/year then that would be a good place to start before getting more complicated with backdoor Roth stuff. Hey, appreciate you taking the time to check out the channel...cheers, boss!

@Tom M - Hey Tom! Appreciate you taking the time to watch the video and comment. Yes, I am saying that $5,640 will be taxed again at the time of doing the $6,000 conversion...this is due to the Aggregate Rule or Pro-Rata Rule. I hope I'm understanding your question correctly...if you're saying that you'll only convert those $360 from Trad. to Roth and the remaining $5,640 will remain within the pre-tax Trad. IRA then my question back to you is....how will your account differentiate those $5,640 (which will be growing tax-deferred while invested within the Trad IRA) when you want to liquidate money from your Trad IRA? Lastly, part of the point of doing the backdoor Roth strategy is to get as much money converted over into Roth as possible...and in my opinion, only backdoor'ing $360 is well.....meh....lotta hassle for not a lot of after tax money growing tax free instead of tax deferred. Please let me know if I misunderstood your comment/question. Thanks, boss! Cheers!

@@Financial_Awareness - No. I'm saying you converted $6K but because of the prorata rule you only get to avoid taxes on the $360 (as you demonstrated in your exmple), and the other $5,640 is considered you converting your pre-tax contributions (and you now owe any tax that may be due). Basically the IRS made this rule to get their taxes sooner. And to avoid people converting just their non-deductible contributions....and truly having a backdoor Roth contribution. Where I believe you're incorrect is in that you are saying that people get taxed AGAIN on that $5,640. No! Not true. Although it may FEEL this way since your whole plan was to backdoor $6K. Your remaining non-deductible contributions are still available to be tax free as you do future conversions or start taking distributions. It's just that by having non-deductible contributions you have the ongoing burden of tracking that amount until such time that your traditional accounts are zero. In fact, you have this record keeping burden if you made any non-deductible contributions, unless you just want to pay tax on all of it (in which case THEN you would be paying tax again to ease yourself the record keeping and tracking). So in your example, your next conversion (straight conversion with no additional ND contribution) you would have your $5,640 / TOTAL ACCOUNT BALANCE to determine the non-deductible portion that would not be subject to tax. If you had added another $6K, then you would have $11,540 / TAB. So, to your question "how will your account differentiate those $5,640"? The account itself will not (nor will the brokerage firm). It is YOUR responsibility. But to be clear the growth of the $5,640 amount is NOT subject to any tax avoidance benefit. The growth is only tax deferred as the rest of the account. ONLY the non-deductible CONTRIBUTION has that status. Thus a little easier to track your non-deductible amount going forward. It's been some years, but I did this previously. However, I had some down income years and converted it all in three years time. And I knew that would be the case. Then I became self-employed and started maxing out a SE 401K and now have a substantial pre-tax account. Giving the fact that I am now older with less compounding years in front of me and the large amount in this account, it is unlikely I will do any future backdoor Roth conversions. I will however, take advantage of any down income years and convert any amounts I can get over to my Roth while creating a minimal tax consequence if any. I agree with you on the idea that a backdoor Roth is not necessarily worth the record keeping going forward if you have substantial assets in those traditional accounts. If not as much then get it all converted as quickly as possible. I also will add that IMO, Roth accounts are far more beneficial when you're younger. Your income is generally lower, thus lower tax brackets, and you have decades of compounding growth ahead of you. As you get closer to retirement age, the Roth benefits diminish.

@Tom M - Definitely agree that the value of Roth Conversions diminish once you hit retirement age. Because of this I tend to suggest that post-retirement roth conversions be liquidated towards end of life or later in retirement years so the converted funds have had 10-20+ years of tax free growth to realize their true benefit. Liquidation order is something to manage during those years for sure...I mention something similar to that in my Tax Bracket Management video. Loved your insight, detail, thoughtfulness, and length of your response....you're dialed in and I love to see it! Cheers!

@@Financial_Awareness - Did you understand my point on the fact that double taxation is not occurring and that you still have future non-deductible amounts available to you? Or did I not explain it clearly enough? It's an issue that can easily confuse people...even us who are more savvy about finances. There are areas where people do get double taxed in life, this just isn't one of them. However, the backdoor Roth becomes less appealing the larger your traditional accounts hold since the record keeping hassle diminishes the small amount you can actually defer taxes. Not to be confused with Roth conversions (not involving backdoor). Yes, I agree that ANY conversion should be of funds that have time to grow. I'm about a decade away from being able to tap any retirement accounts, but even so I still weigh the decision to convert some every year simply to reduce the taxable ordinary income portion and to increase my Roth along with regular brokerage to give an overall flexibility during retirement to control taxes based on where money is coming from. Often people forget that retirement planning isn't until you GET to retirement, but hopefully for some decades into retirement and that they will still want their money growing.

@J S - Sorry to be the bearer of bad news, but you didn’t do the backdoor correctly and your conversion is going to be taxed. The Pro-Rata aka Aggregate Rule is where you goofed up here. It doesn’t matter that your rollover IRA is a separate account…because ALL of your IRA accounts are aggregated - hence the “aggregate rule.” IMO, you need to reverse/undo what you did or rollover that rollover IRA into a 401k to avoid additional taxes. All that said though, I appreciate you watching this video and being part of the channel. Strong recommendation for you to re-watch the video to its full length and focus your attention on the part where I discuss the Aggregate Rule. Hope you get it fixed! Cheers boss!

@@Financial_Awareness My CPA said it is fine as long as we contribute $6000 or less of the post taxed money. What are your thoughts?

@J S - Pro-Rata Rule or aka Aggregate Rule comes into play here. Let’s assume you have $40,000 in your pre-tax, rollover IRA. Then you contribute $6,000 of after-tax money into the rollover account OR into ANY pre-tax IRA for that matter…then you go to convert the $6k from IRA to Roth (backdoor)…well…. $6,000 divided by $46,000 (which is the added aggregate of ALL your “IRA accounts”) which equals 13%…meaning that ONLY 13% of your $6,000 is pro-rated and can be converted over tax-free. Conversely, had you done what the video suggests of not doing the backdoor Roth until you have $0 in pre-tax IRA accounts (which can be achieved by converting all pre-tax to Roth OR by rolling those IRA funds back into a 401(k) or 403(b)…well then, $6k divided by $6k = 100% of the $6,000 can be backdoor’d into your Roth. What are your thoughts? Did you look up/Google any Pro-Rata or Aggregate Rule info after watching the vid or speaking with your CPA? IMO, I don’t believe all of your amount converted is allowable, but where’s the oversight in this situation? It could just be a problem if you ever got audited. 🤷🏼‍♂️

@@JS-hl1oc Your rollover IRA is a traditional IRA which counts works against you since pro-rata rule applies here. There is a solution that *KS* mentions: Do you have a 401(k)?

@@alrocky yes, I do

@B Y - Hey thank you! Glad you found a financial nugget or two in this one. Cheers, boss!

@Deepak Khopade - Deepak - Yes, sir, you got it! Seems as if you have a full understanding from what you shared...only item I'll add (which I'm sure you already understood) is to simply KEEP the non-deductible Trad IRA contribution in CASH until you move it over to your Roths....then invest the funds. Hey, thanks for taking the time to check out this video...hope there might be a few others within the channel library that are of interest to you. Cheers, sir!

@@Financial_Awareness Thank you for your kind reply.

@Noma Sana - Oh wow! I'm glad it was recommended to you then...awesome! The aggregate rule always applies - no matter how much you contributed. In reading through the lines of your comment, it seems as if you've made too much money to be able to do your Roth contribution...if that is the case then well done on having a fantastic household income during 2021. Sweet! Yeah, what you'll have to do is contact your broker-dealer (wherever your Roth is located) and explain the situation to them. You'll probably ask for a "removal of excess"...in your case it would be the full $6k. Then, once you have the funds back in your checking account (penalty free hopefully) you'll then want to open up a Traditional IRA, make a non-deductible contribution there (do NOT invest the funds), wait maybe a couple days for the contribution to settle, then transfer all $6k to the Roth...from your comment it seems you do not have any other funds in any other pre tax IRA account (nothing in SEP/SIMPLE/Trad IRA)...so you'll be good to go to transfer the full $6k to Roth...then you invest the funds. Does that help clarify things a bit? If not, let me know if you have more questions. Thanks for checking out this video and being part of the channel...hope there are other vids within my content library that are of value to you. Cheers!

@Kevin Tran - What a great question! Really made me think there. In my opinion, yes you can do this. The non-deductible contribution into your pre-tax IRA is fine...you have until April 15th to do this for the previous year...good there. Since you mentioned NOT converting any of this 2021 contribution until AFTER you convert the other pre-tax funds over to Roth...then you're good there too because all the pre-tax funds will then be Roth leaving you with your nondeductible $6k 2021 funds still sitting in cash within your pre-tax account waiting to be backdoor'd to the Roth. Great question and thought! Thanks for checking out this video and the channel...appreciate you!

@@Financial_Awareness thanks for your input! The opportunity to contribute to the ROTH is limited so you have to maximize while you can

@Kevin Tran - 100% agree. We are maxing out my wife's Roth 401k through her employer plan...will be nice to have all that tax-free money when we are in our 60's. Excited for you to be in a tax-free comfortable situation during your retirement as well. Nice!

@Tim Bosh - Thanks, Tim! Appreciate the feedback and taking the time to check out a few videos within my content library. Hope you found a few financial nuggets while watching. Cheers, boss!

Robin Denton - Thanks for the positive encouragement and I’m pumped you enjoyed the video! Appreciate you. If you’re referring to converting from Trad. IRA to Roth or pre-tax 401k to Roth 401k then the $12k will be added to your total gross income from 2020...so it won’t help your taxes...and you’ll owe more Federal Income Tax on that amount (which as you may have seen from a few of my videos...I vote it’s worth it). If you’re referring to just dumping $12k into Roth account (either Roth 401k or $6k into two Roth IRAs)...it also won’t do anything for your taxes today/this tax season or any other tax season. No deduction for ANY contributions to Roth accounts. However, when you have several hundred thousand dollars (or $1M+) in Roth accounts in your 60’s and older...you’ll be able to pay cash for an amazing car/house/retirement lifestyle without owing any taxes from Roth IRA or Roth 401k liquidation. You can play checkers or you can play chess...pay taxes now (Roth) or pay taxes later when your account balance is higher. If your employer allows, you can see about doing Roth 401k contributions and after tax contributions into 401k (Max into 401k is around $57k between you & employer). Hit me up if you have questions...happy to be a sounding board. Appreciate you, boss! 👍🏻👍🏻

@anthony b - Yes.

@J’s Place - Hey thanks, J! Appreciate you checking out the video and sharing your comment/question. Short answer - yes you can still utilize a back door Roth...you're all good...don't need to move those 403b funds in order to do your backdoor roth. Longer answer: you mention that the funds are "not being invested..." If you mean you're not able to contribute to them because you're no longer employed by the employer that administers that plan...then I understand. However, if you mean that the funds are truly not invested and you're sitting in cash...then I would strongly encourage you to do some research on your risk tolerance and available investment options within the plan and to get those funds invested so they can grow. Also, if you are sitting in cash...right now is a good time to buy if you have a long enough time horizon. Let me know if I misunderstood you. Thanks boss...cheers!

Spielzeit85 - First off, thank you for taking the time to watch this video! Really appreciate that and hope there are others within my content library that are of value to you. Second, holy crap!...congrats on starting your new job in 2021...super pumped for you & your future wealth building endeavor. I imagine the road that lead you to this point was challenging and I’m thrilled that you’ll be able to reap the rewards of your hard work & sacrifice. Well done there. To answer your question, yes, you are able to do the Backdoor Roth strategy the way you explained. Only form you’ll need is noted in the video regarding making a non-deductible IRA contribution (Form 8606 on IRS website)...would help to inform your brokerage company you’re using as well so they note it on your account/records (Schwab/Vanguard/Fidelity/etc). Are there any video topics you’d like to see and have more clarity on a particular subject? Are you in the medical field? Thanks again! Please subscribe if you haven’t already...would love to have you around the channel. 😃👍🏻👍🏻

@zhi zhang - Yes you can.

@Mykol - 100% yes! That is not a 'backdoor' Roth...that is simply a transfer from after-tax Roth 401k TO after-tax Roth IRA. With a rollover that is 100% possible...if you are still employed then in order to do this your employer's plan will have to allow "in service distributions" in order for you to be able to do this. Hey, thanks for checking out this video and researching this topic. Well done. Cheers!

@@Financial_Awareness the 5 year rule does not apply? Thank you i have reached out to my Nationwide rep to start this.

@Mykol - It is my understanding the 5-yr rule is in regards to Roth IRAs and not Roth 401k’s…the real kicker in this question is whether or not the employer plan allows for in service distributions. If they do not, then you wouldn’t be able to transfer from Roth 401k to Roth IRA until after emolument is terminated with said employer.

@@Financial_Awareness you last comment was exactly it. I cannot transfer it but have given me the option of a self-directed brokerage. Haven’t looked this up much so not sure what it really is or which brokerage it would be.

@Mykol - A brokerage account is simply a normal investment account with no tax advantages…also known as a non1qualified account (because they do not qualify for tax benefits). These accounts are great if you’re on track to retire before age 59.5 and will need to liquidate funds at ANY point in time without penalty. Downside, you’ll owe either short term or long term capital gains each year as your account grows, but there are no income or contribution limitations. My wife and I own several accounts in this manner for different “emotional” purposes…kids, wedding planning, early retirement, etc.

@Santosh Mudaliar - It is the same process each year… Step 1 - contribute money from checking account to Trad IRA. (do NOT invest the $6k) Step 2 - transfer the $6k from Trad. TO Roth IRA (this is super easy if both accounts are with the same broker) Step 3 - now you invest the money in your Roth based on your risk tolerance and goals with that account. …hope that’s helpful. Thank for checking out the video! Cheers boss!

@Justin Muir - Thanks for that feedback! Yes, makes sense to me. If you're above those income thresholds then you're in the 22% / 24% marginal tax brackets and in 2025 it is very likely that taxes will be going up....so yeah, if you can swing the tax bill, then I'd probably convert it between now and 2025 and let all the growth happen within the Roth growing tax free. Looks like you're doing a great job, Justin! Keep it up man. Appreciate you taking the time to watch the video...cheers, boss!

@@Financial_Awareness thank you!

@Jun Li-Chapman - Hey there Jun! You do not get a tax break for converting pre-tax money to after-tax money…it is a taxable consequence, but the benefit is the amount you convert will then begin to grow tax-free instead of growing tax deferred. Please let me know if I misunderstood your question. The Aggregate Rule percentage has to do with how much of those non-deductible contribution funds being converted to Roth can be converted tax-free…here’s another example… $34,000 in existing, pre-tax IRA. You then contribute $6k (non-deductible contribution)…so now you have $40k in IRA…you go to convert the $6,000…well $6k divided by $40k = 15%…so only 15% of $6,000 can be converted without causing additional taxes…which would be $900…and the remaining $5,100 of your non-deductible contribution remains in the pre-tax account (growing tax deferred despite the principle being an after tax contribution)…which you can convert later if you want. Again, let me know if I misunderstood your question. Hey thanks for taking the time to check out this video and the channel. Cheers!

I think I figured it out, the limitation with respect to backdoor Roth CONVERSIONS is the funding of that conversion is from a non-deductible Traditional CONTRIBUTION which is limited to $6,000/year. Is that correct? Sorry if this was an obvious oversight.

@Nick - No worries man! Bingo…you got it! If you have $100,000 in pre-tax Trad IRA you can convert any amount, however often you want….but yeah once all that is converted then you’re back to the max contribution limit of $6k to Trad then can initiate back door steps from there. Another alternative (if your employer plan allows for it) is to do an in-service distribution from your 401k to Trad IRA which would allow you to do more conversions from there…however you also could convert from 401k to Roth 401k within the plan itself…you’re just limited to the 17-20 investment options there if you do it that way. Hey man thanks for checking out this video and being part of the channel. Hope there are other vids that are also of interest to you. Cheers boss!

@Nick - Also…never worry about asking silly questions…all questions are welcomed!

​@@Financial_Awareness Thanks so much!

M Pow - Appreciate the kind words. Happy to help however I can so it is more clear. What question do you have? I’ll do my best to answer and provide guidance/education. If you’re able to transfer/rollover your separate IRA into your current employer plan (pre-tax account TO pre-tax account so there’s NO taxable consequence) then you should have no issues doing the Backdoor Roth strategy. Alternatively, you can simply make Roth 401k contributions if your current employer 401k allows for it & if you’re looking for a some tax-free growth. What’s your question?

@@Financial_Awareness I have a few questions so I will sign up for a call with you. Thx!

M Pow - Understood. Looking forward to it. If you have your questions prepared in advance it will make it more efficient...my goal is to not waste your hard earned money.

@A Z - You know what - $135k for 2020 is right in that income phase out limit range for making a normal Roth IRA contribution...Roth IRA contribution eligibility is based off your Modified AGI...so while you have the time (between now and April 15th) you should look into your AGI for 2020...because you can make a 2020 Roth IRA contribution up until April 15th, 2021. If $135k was your gross you could be under the threshold. That would save you the headache of the Backdoor Roth. However, all that said, if you have SEP IRA funds then you shouldn’t do a Backdoor...just doesn’t make financial sense as I outlined in the video. If you can roll those funds over into a Solo 401k (or normal 401k if you’re employed as a W-2 now) then you could do a Backdoor Roth if you’re phased out from Roth IRA. Hey, thanks for checking out the video! Appreciate you. Cheers!

@tuongdnguyen - Nope. The aggregate rule includes all Traditional IRA balances. You’d have to roll those funds over into a 401k or 403b or convert all of your Trad IRA over to Roth IRA in order to be able to do backdoor Roth. However, you might know this from watching other videos of mine, but there are NO income limitations to Roth 401k’s...so if you’re not already max’ing your 401k at $19,500 then you could do some Roth 401k contributions instead of trying to do backdoor Roth. Just a suggestion. Hey, appreciate you taking the time to check out the video...cheers! Hope my other videos are just as helpful. Thanks!

@@Financial_Awareness I hadn't explored the option of a Roth 401k. I will look into it. Thanks!

@Deepika Tadakhe - If I’m understanding your question correctly…we’re talking about twelve cents here…is that correct? If so, my response is….this isn’t a big deal. The amount is so small I don’t think it matters at all. Congrats on investing for your future self…so proud of you!

Go ahead and convert the entire $12,000.18 traditional IRA to $12,000.18 to Roth IRA. You owe tax on *eighteen cents.* Pro Rate rule does not impact you unless you have any traditional IRA balance by end of this year.

@Sumeer - Hey thanks for taking the time to check out the video and channel - much appreciated! Yes, in order to be able to contribute to a Roth IRA you have to have earned income equal to the amount that you want to contribute (or more obviously)….you can’t earn $2,000 and then try to contribute $6,000. …and I could be wrong, but I believe social security income doesn’t count towards “wages” in this calculation. Unless you can somehow find a way for them to produce an income then you wouldn’t be able to set something like this up…even if they are your dependents. I have heard of some business owner parents (of minor children) putting their kids on their company’s payroll so that they can start to earn money, learn about work, and contribute to a Roth IRA, but I haven’t heard the same for adult parents that become dependents of their own kids.

@@Financial_Awareness thanks for your response! Does the gift of $7000 to my parents work, to contribute to Roth IRA even if they don't have earned income? I file taxes as head of household.

@Sumeer - I am not a CPA, but I feel confident in saying ‘no’ is the correct answer to your question. A gift is not the same as “wages” and earned income. Best bet would be to look over their previous tax return and see how their income has been classified. Form 1040, line 1 is dedicated for “wages, salaries, tips, etc” and on the form it says to “attach Form(s) W-2” and lines 2a through 6b & line 7 are all dedicate for other sorts of income…such as SS benefits are inputted on line 6a. Soooo, I’m pretty sure that line 1 needs to have some sort of figure/income in order for them to be able to contribute to a Roth IRA. Believe me, I WANT to tell you, “sure that’ll work - go ahead and do it!” However, I do not believe it would be allowed. The oversight on this is a little antiquated though…because let’s just role play this out…if they did open up Roth’s for each of them and started making contributions…how would anyone know? IRS would only find out if they audited your tax return and combed through your paperwork. 🤷🏼‍♂️ - still though, I wouldn’t do it. Need to have “earned income” which will be in the form of a W-2 or 1099…I do not believe SS benefits or gifts count towards “earned income.” Hope all that helps! 👍🏻👍🏻

@@Financial_Awareness that's very helpful thanks a lot! If an earned income is $7000 per year, does it need to have a record of W2 or 1099? Can income not be in cash paid? Like my parents took care of my baby this year in 2021, so can I show I paid them cash money and they open Roth IRA with it?

@Sumeer - Yes, to be considered eligible the earned income would need to be reported on a tax return & you need to pay taxes on the $7k. Also, probably a good idea to speak with a CPA about this situation you’re in…because you first mentioned that they have no income and now it would seem you’ve paid them $7,000 for babysitting…not really sure how that would fly with the IRS on your tax return given as they’re your dependents. A CPA would help clarify this for you. Cheers! Happy new year!

@Jude - Hey, Jude! So, to properly answer your question we need to first define that a “conversion” & a “contribution” are two completely separate transactions. Like milking a cow to get milk is completely different than buying milk at the grocery store to get milk…😂😂😂…from the IRS’ point of view, they love the idea of you converting as much as you want right now because that’s cash in their pocket today! Boom! So, there’s NO limit on the amount you’re allowed to convert…if you’ve got $7,865,309 in a Trad. IRA and want to convert it all…you’re allowed to! Conversely, the IRS wants to limit how much money we can Contribute into a Roth IRA because those funds are no longer able to be taxed once the funds are in the Roth. Hence, a contribution limit of $6,000 (addtl $1k for 50+) & an income cap of basically $200k for MFJ…if you make more than that you’d have to do a Backdoor Roth or Roth 401k to get money growing tax free. Apologies for the lengthy answer…hope that answers your question. Thanks for checking out the video, boss! Cheers!

@Rachel Mead - Bingo! Correct.

@@Financial_Awareness thanks! Love your channel.

@Rachel Mead - Thank you so much! Ugh, I’ve got guilt on my heart for not uploading as regularly & consistently as I once did…need to get back to a regular film/upload schedule, but my life is just too busy these days. Need to make it a bigger priority. Really appreciate your kind words for sure! 😃

@@rachelmead3876 Not exactly. To avoid pro rata rule you should have *zero* dollar balance in traditional IRA on Dec 31 at end of year.

@Dennis Grutzner - thanks boss man! Appreciate you.

@William Surles - Hey William! Thanks for checking out the video. You are absolutely correct - you can own & contribute to both a Trad & Roth IRA. However, no matter how you split up your contributions to both...your total contributions cannot equal more than $6,000 limit. "Why in the world would you convert form trad to roth and then put 6k into the trad to use the backdoor to move it to the roth. that makes no sense.".....well William, the reason some of us have to do it this way is because some people have higher incomes than others. For those with incomes above the limit you CANNOT make a direct contribution from your personal checking account TO a Roth IRA...so...you have to 'backdoor it' via this strategy I explained in the video. If that wasn't make clear to you then I'm sorry, but the backdoor roth strategy is ONLY for people who make above the limit and want to save MORE money than just their employer sponsored plan will allow. Does that help clarify things a bit? Thanks man!

@@Financial_Awareness to be fair, i don’t even understand my comment anymore. Ha. I would have to rewatch. I think I was just referring to your section on Roth-IRA conversions to get the 100%. I didn’t mean it to be super negative sounding but I don’t think you need to do any IRA conversions. That’s all. But I did figure out the process later. You use the after-tax option (fidelity has this) and put in whatever percent you want for Roth-401k (up to limit) and then also after-tax (up to that even higher mega limit). Then you call them and ask them to do automatic conversions of after-tax to Roth-401k after ever paycheck. They have that capability. So you lose nothing to taxed earnings. Then you can transfer from the Roth-401k to personal Roth-IRA when you leave company per usual.

Sounds like you’ve got a good grasp on your stuff…love it man! Love anyone’s desire to save more money - it’s such an awesome thing to see. My only gripe with the mega backdoor roth (basically what you described) is…”how much money is too much money for qualified retirement accounts?” Yes, Roth IRAs have their 5-year withdrawal rule - got it - but personally speaking, I’d rather max out Roth 401k and instead of throwing surplus funds into after-tax 401k…I would rather those funds go towards normal brokerage until enough has been saved up for 20% down on an investment property…then rinse and repeat. Conversely, you could use brokerage funds for potential venture capital endeavors, starting your own business, or becoming a limited partner in another business…just sooo many other options than adding more to all things Roth-related. Again, just my opinion. As your wealth grows your ability to invest in other ways will present themselves and having brokerage funds that can easily be liquidated/wired is a great source of capital. What do you think? All good man…I try to keep it chill, but I’m sorry if my replies didn’t carry the right tone sometimes. All good.

@@Financial_Awareness 100% on the same page with you. Maxing the Roth 401k (and HSA) is plenty to save for retirement. And we can increase later if needed. But I agree saving for a house is better. And the other options you mentioned. Gotta live now. : )