Anyone have a 401k and a MEGA Roth at work?

[Anonymous]

So apparently my company has high participation accross all salary ranges in the 401k program. This had allowed them to offer a mega roth. Sounds WAY too good to be true. They are saying we can contribute up to 16,500 of after tax money this year into our 401k account (mind you this is taxable income) and then prior to the close of the tax year we can convert that entire 16.5k into a roth. They say that if employee participation is also high on this, the contribution limit will be raised for next year. This all sounds amazing. Too amazing to be allowed such a high contribution with this alleged loophole our 401k admin has set up for us.

[Anonymous]

Awesome! My husband had a mega backdoor Roth for a while at an old job and we took full advantage. Just beware that the whole thing gets a lot more complicated if you have any other traditional IRAs or rollover IRAs lying around.

[Anonymous]

The Fed gov't is already doing a 18.5K Roth TSP (401K) option minus the need to convert. Are you sure that this isn't a Roth 401K?

[Anonymous]

This is not a mega roth.

[Anonymous]

We can contribute $29K post tax after we’ve maxed our pre tax contribution.

It’s a great benefit but I don’t have $29K post tax to invest.

[Anonymous]

Anonymous wrote:This is not a mega roth.

Yes it is. We have one too.

OP, no, it is not too good to be true. It is a great tool to beef up your retirement. Here is how it works. We are allowed up to 53k into retirement contributions. 18,500 comes from me pre tax, employer contributes 10k I to my 401k, pre tax. We then can contribute $24,500 into our mega roth via our 401k of post tax income and yes, then it gets converted by my own personal FA into a backdoor roth. It is complicated. However, if you have the money to do it, you can, like me, end up contributing 53k/yr into retirement in your 30s/40s wich will pay tremendous returns. My wife has only a 401k, with an~8k employer contribution, so we are saving at a clip of $79,500/yr for retirement. I absolutely see a poi t in time where we no longer need to contribute before we even hit retirement age.

[Anonymous]

Anonymous wrote:The Fed gov't is already doing a 18.5K Roth TSP (401K) option minus the need to convert. Are you sure that this isn't a Roth 401K?

I work in the private sector. This is definitly distinct from our 401k plan wihc is traditional with a generous match. The taxable money for the roth only sits in the 401k until you pull it to convert it into the roth. It is essentially a place to "hold" the money. The money can't go from my hands into the roth or else we would be held to the traditional IRS rules.

And thanks to the PP, this is basically what my company is saying they are offering and the idea of saving 70k/yr in retirement is pretty exciting.

[Anonymous]

I now have one too After maxxing out pre-tax (18,500 + 6000 for catch-up contributions after age 50), I can contribute another $30k or so, up to where my pre-tax+after-tax+employer match = $61k. And I can do an in-plan Roth rollover whenever I want. (have to pay taxes on any earnings that accumulate in the interim, though)

I have a boatload in 401k and an inherited IRA already, so it's a great way to start getting my Roth built up. My paycheck becomes pretty tiny, though. Using money in my after-tax brokerage account to make up the difference.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is not a mega roth.

Yes it is. We have one too.

OP, no, it is not too good to be true. It is a great tool to beef up your retirement. Here is how it works. We are allowed up to 53k into retirement contributions. 18,500 comes from me pre tax, employer contributes 10k I to my 401k, pre tax. We then can contribute $24,500 into our mega roth via our 401k of post tax income and yes, then it gets converted by my own personal FA into a backdoor roth. It is complicated. However, if you have the money to do it, you can, like me, end up contributing 53k/yr into retirement in your 30s/40s wich will pay tremendous returns. My wife has only a 401k, with an~8k employer contribution, so we are saving at a clip of $79,500/yr for retirement. I absolutely see a poi t in time where we no longer need to contribute before we even hit retirement age.

I’m saving approx the same amount (52-54k) and really hope it adds up! I’m 35 now. My husband on the other hand can only save around $24k including his match.

[Anonymous]

Can low income people do that too?
If my annual salary is 75k, will my low monthly paycheck qualify me for snap and housing benefits, food bank

[Anonymous]

Anonymous wrote:Can low income people do that too?
If my annual salary is 75k, will my low monthly paycheck qualify me for snap and housing benefits, food bank

It depends on your household size.

[Anonymous]

Anonymous wrote:Can low income people do that too?
If my annual salary is 75k, will my low monthly paycheck qualify me for snap and housing benefits, food bank

Only if your employer offers it. We have a lot of people who are in that salary range at my company and they are eligible for the benefit. This is not a benefit open to people who don't have a company plan that offers a mega roth (it is rare that any company offers this) and not open to companies that dont have a high participation rate for the bottom 80% of earners in the company 401k plan.