Most lucrative area of Software Engineering

[FlyerInHi]

Deadzone, I think you have a point.

There are some, maybe many, but not the prevalence. Pointing to a few is not indicative of the overall situation.

[Myriad]

Then there’s the new ruling from the IRS. If you max out your 401k, any excess after-tax contributions can be automatically rolled into a roth IRA at distribution.
Basically another backdoor way to a Roth IRA if your income is past the limits.

[cvmom]

[quote=Myriad]Then there’s the new ruling from the IRS. If you max out your 401k, any excess after-tax contributions can be automatically rolled into a roth IRA at distribution.
Basically another backdoor way to a Roth IRA if your income is past the limits.[/quote]

Hey, this is really useful info. Thanks so much for posting!

[Coronita]

[quote=cvmom][quote=Myriad]Then there’s the new ruling from the IRS. If you max out your 401k, any excess after-tax contributions can be automatically rolled into a roth IRA at distribution.
Basically another backdoor way to a Roth IRA if your income is past the limits.[/quote]

Hey, this is really useful info. Thanks so much for posting![/quote]

I’m not familiar with this rule…..What is this rule about?

[Myriad]

IRS Notice 2014-54 Acquiesces On Splitting After-Tax 401(k) Contributions For Roth Conversion

Basically when you pull money out of 401k to put in Rollover IRA, the after-tax 401k portion can go directly into a Roth IRA.

“While plans will still need to be cautious to navigate the ACP (Actual Contribution Percentage) test, where feasible the new “hierarchy” of tax-efficient savings strategies for retirement may now be:
– Obtain 401(k) match;
– Contribute further to max out pre-tax IRA and 401(k), or instead a Roth IRA and Roth 401(k) if current tax rates are low;
– Make after-tax contributions to the 401(k) plan if permitted, up to the annual defined contribution plan limits, in anticipation of converting those after-tax contributions in the future;
– Contribute to a low-cost non-qualified deferred annuity being used for tax deferral (which gets the tax-deferred growth treatment like after-tax contributions to a 401(k) plan, but not the ability to do a subsequent Roth conversion of the cost basis!)
“

[Coronita]

[quote=Myriad]https://www.kitces.com/blog/irs-notice-2014-54-acquiesces-on-splitting-after-tax-401k-contributions-for-roth-conversion/

Basically when you pull money out of 401k to put in Rollover IRA, the after-tax 401k portion can go directly into a Roth IRA.

“While plans will still need to be cautious to navigate the ACP (Actual Contribution Percentage) test, where feasible the new “hierarchy” of tax-efficient savings strategies for retirement may now be:
– Obtain 401(k) match;
– Contribute further to max out pre-tax IRA and 401(k), or instead a Roth IRA and Roth 401(k) if current tax rates are low;
– Make after-tax contributions to the 401(k) plan if permitted, up to the annual defined contribution plan limits, in anticipation of converting those after-tax contributions in the future;
– Contribute to a low-cost non-qualified deferred annuity being used for tax deferral (which gets the tax-deferred growth treatment like after-tax contributions to a 401(k) plan, but not the ability to do a subsequent Roth conversion of the cost basis!)
“[/quote]

But does this assume you have no other iras? For example. Is this still allowed if you have a rollover IRA?

[Myriad]

I don’t think other IRAs matter. This deals specifically with 401Ks and after-tax 401Ks that are held in a employer plan.

[Author]

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