Page 1 of 1

back door, mega back door opportunity and situation what to do...

Posted: Wed Jan 22, 2020 1:34 pm
by MCHFBJTNW
Situation:
#Have old monies in IRA - which needs to clear to $0 in order to a back door - 6k limit applies.

Opportunity:
Employer saving plan, updated to:
401k
401k roth
*After Tax contribution (supplemental) >>>> this can be rolled into a Roth IRA per pay period while in service.(mega back door 57k rule applies)..confirmed from HR and also the Custodian - Fidelity in this case. Fidelity issues 1 1099R for rollover to ROTH IRA from after tax monies only -- any gains (if any until the roll over - need to pay tax or roll into IRA)

Question:
1. Can I take advantage of this mega back door roth while having old IRA monies still sitting around in IRA (pretax) in # above.
2. If I did not have # (able to zero it out) can I do both Mega + Back door Roth in the same year!

Have few more questions, but this is start - looking which way the direction goes...thank you in advance!!!!!

Re: back door, mega back door opportunity and situation what to do...

Posted: Wed Jan 22, 2020 3:34 pm
by magicrat
1. Yes. One has nothing to do with the other.
2. Yes, you can do both. One has nothing to do with the other.

Re: back door, mega back door opportunity and situation what to do...

Posted: Wed Jan 22, 2020 6:29 pm
by Duckie
MCHFBJTNW wrote:Fidelity issues 1 1099R for rollover to ROTH IRA from after tax monies only -- any gains (if any until the roll over - need to pay tax or roll into IRA)
Since you can do this every pay period just convert all gains. They will be negligible.
Can I take advantage of this mega back door roth while having old IRA monies still sitting around in IRA (pretax) in # above.
Yes, as long as you roll the after-tax amounts directly to the Roth IRA. If you detour through a TIRA the dreaded pro-rata rule will come into play.
If I did not have # (able to zero it out) can I do both Mega + Back door Roth in the same year
Yes. They are totally separate processes.

Re: back door, mega back door opportunity and situation what to do...

Posted: Thu Jan 23, 2020 12:01 pm
by AllMostThere
Another option for you tIRA balance. Can your 401K accept incoming rollover of your tIRA? If so, roll it over to your 401K to drive balance to zero for your Backdoor process.

Re: back door, mega back door opportunity and situation what to do...

Posted: Sat Jan 25, 2020 8:12 am
by MCHFBJTNW
Yes in process of doing that moving old TIRA into 401k and prepping for BD Roth for my situation. I have no mega back door option.

For my spouse here is another situation and question pertinent to Mega Back door.

Plan has spill over feature so when I max out on traditional 401k any spill over get in to after tax contributions. Currently has abt 2.2k in there with a cost basis of abt 1.8k

Can I convert this after tax to in service Roth IRA and just pay taxes for the 400....doing this mega back door .... while there is also a TIRA at the same time old monies ?

Re: back door, mega back door opportunity and situation what to do...

Posted: Sat Jan 25, 2020 9:16 am
by campy2010
I set up a MegaBackdoor Roth in my FIdelity 401k recently and found that my plan allows for automated in plan conversions from after Tax -> Roth 401k. The specialist who set it up implied that more and more employer plans are automating the in-plan conversion process. In my mind, this greatly simplifies the mechanics of the Mega Backdoor Roth. I recommend calling Fidelity and inquiring about how your plan works. Fidelity transfers all of the Mega Back Door phone calls to one dedicated team, and I found them to be very knowledgeable and helpful.

Re: back door, mega back door opportunity and situation what to do...

Posted: Sat Jan 25, 2020 11:13 am
by MCHFBJTNW
Yes will call fidelity have to as they need verbal authorization to do the in service conversion form after tax to roth ira.

Above question was to evaluate if I will be in some tax liability.

Thanks

Re: back door, mega back door opportunity and situation what to do...

Posted: Sat Feb 22, 2020 10:06 am
by MCHFBJTNW
Situation:

Year 2021
80k in IRA (locked in annuity) plan to surrender Nov 2021 and move to 401K that's when IRA (Pretax) will become $0 in 2021. Opening door for back door Roth.

Year 2020
Have After Tax (In Employer Plan) about 20K cost basis (abt 18.2k) in March 2020 (next month)
Intent to roll over (Mega Roth) After Tax to Roth IRA as plan allows in service rollover.

Plan also allow rollover over gains into Tira and not pay tax on it.

Which is efficient
Pay taxes and rollover the entire after tax to Roth IRA
or
Rollover cost basis into Roth IRA and Gains into Tira. (will this trigger any tax liabilities - since in 2020 I have 80k in Tira)
in 2021 merge all Tira and Roll into 401k

Plan is to clear path for Mega back door and regular back door in 2021 onwards and maximizing in 2020 for mega back door.

Is it a good strategy?

Appreciate your inputs in advance!!

Re: back door, mega back door opportunity and situation what to do...

Posted: Mon Mar 30, 2020 3:06 pm
by MCHFBJTNW
Custodian: Fidelity
Plan: 401k - After tax contribution currently valued at 16.8k with a basis of 18.5k.
Plan allows in plan conversion to roth ira.
if I proceed with conversion to roth ira -
  • can I claim loss from the basis in my 2020 tax - hoping someone has experience with this with fidelity how 1099R is written up
  • best to wait it out until the basis and value almost the same then do the the conversion
  • leave some amount in after tax to off set future gains - though contributions have maxed out for 2020 next will be in 2021
  • any other options?
thank you!