Priority among after-tax 401(k), HSA, back-door Roth and 529

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kcb203
Posts: 67
Joined: Fri Nov 08, 2013 11:27 am

Priority among after-tax 401(k), HSA, back-door Roth and 529

Post by kcb203 » Thu Jan 02, 2014 3:05 pm

I just realized last week that my 401(k) plan allows in-service rollovers of after-tax contributions to a Roth IRA. That has changed my plan for 2014 as I had previously planned on:

1) Maxing 401(k) at $17,500
2) Maxing HSA
3) Maxing back-door Roth for my wife and me.
4) Maxing Virginia 529 state deduction at 4000 per account per parent ($16,000 for us).
5) Putting anything else into taxable.

Now that I've got an extra $27,700 ($52,000 minus $17,500 minus $6,800 company match = $27,700 to remain under $52K limit) headroom for after tax 401(k) --> Roth IRA conversion, I'm not sure which of the above to skip. It seems as though the HSA has the advantage of avoiding SS and Medicare tax (though I'm above the SS max, so that doesn't help all that much). I can always withdraw for medical later on as needed. The state deduction on the 529 saves me $920/year in state income tax, so I feel like I should continue that. The back-door Roth is obviously redundant. Anything else I should be thinking about?

I can only do two in-service rollovers per year and am charged $25 for each, so I plan to frontload my contributions as much as possible and convert all at once as early as possible.

bdpb
Posts: 1543
Joined: Wed Jun 06, 2007 3:14 pm

Re: Priority among after-tax 401(k), HSA, back-door Roth and

Post by bdpb » Thu Jan 02, 2014 4:55 pm

kcb203 wrote: 5) Putting anything else into taxable.
Replace 5 only.

Bacchus01
Posts: 2046
Joined: Mon Dec 24, 2012 9:35 pm

Re: Priority among after-tax 401(k), HSA, back-door Roth and

Post by Bacchus01 » Thu Jan 02, 2014 5:31 pm

I would put it as 5 and move 5 to 6.

It is not redundant to the Backdoor Roth. It is IN ADDITION to the Backdoor Roth.

If you have to, you might also put it in front of item 4 since Roth's can be used for higher education expenses.

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