I’m thinking of investing in Roth IRA but have couple questions. I work for Amazon, and they provide option for Mega backdoor Roth IRA. Here is how I think it works: put money in fidelity post-tax 401k -> set up In-Plan-Conversion for Roth IRA account -> fund is automatically transferred into Roth IRA account. How is the operation above better than transferring money from bank account to Traditional IRA and then to Roth IRA (backdoor Roth IRA)? Tax-wise, I think it’s the same, but looks like you saved the hassle to create Traditional IRA account? What am I missing here? Please correct me if I’m wrong TC: 350 #investments #retirement
Meta back door Roth needs to be supported by employer … not all employer supports mega back door Roth … normal IRAs can be filled from your bank account … mega backdoor contributions need to come from your pay check
Invest in a backdoor roth. Then if you want to invest more, do mega backdoor. You can do both
for backdoor the limit is only 6500$ however for mega backdoor the limit is 66000$ (you can contribute up to 66k-22.5k-employer match). mega backdoor is mostly for people who have money left after every paycheck and want to save for retirement
Same but after tax 401k Roth has a much higher limit than an Ira which is often why it is called the mega backdoor Roth. More money you can get tax free growth on the better. Paying taxes is honestly for suckers unfortunately
On small correction: Automatic conversion moves money from After tax 401k bucket into Roth 401K. If you want money in your Roth IRA - you have to call Fidelity .
Maybe? But are you getting 6.5k for Roth IRA from backdoor limit? Those actually come from different pools, so one can potentially do both. So, (using your numbers): 40k megabackdoor after-tax, 401k, 22k pre-tax 401k, and then 6.5k backdoor IRA (being mindful of any tax implications such as the pro-rata rule, but this isn't tax advice because I'm not a tax specialist).
The megabackdoor 401k is usually handled by a different provider than the backdoor IRA. The backdoor IRA isn't tied to your employment.
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What OP is describing is NOT a backdoor Roth IRA, it's a mega backdoor Roth 401k. Not all employers allow it, and the limits are indeed different. Note that the backdoor Roth IRA conversion requires special pre/post tax consideration so consult with a tax specialist (re: pro-rata rule, but I'm not a tax specialist or CPA so this isn't tax advice...). ETA: These are different things, with different outcomes. Some people do both but you need to understand them more fully before you start.
How’s the limit different? I thought Roth IRA account only allow 6500 contribution per year?
Megaback door you can contribute up to the difference between normal 401k limit and 66k I think for 2023, with some variance for technicalities specific to employers. Check the Amazon investing wiki or Slack channel for a ton more info.