4 ms·

this is the so-called back door 401(k). it’s a mistake to contribute to that.

lsc 7y ago
eh, it conveys all the advantages of a roth IRA, plus (I believe possibly) stronger bankruptcy protections, (because it's rolled over from a 401K) - so assuming you can contribute to it (which is to say, you have money after maxing your pre-tax 401K) I think that it's a thing you should consider. Note, I think that maxing out your pre-tax retirement savings first is a good idea because it manages risk well; when you go to withdraw, you pay taxes based on how much you withdraw; If you are rich when you retire, you'll pay a lot of taxes, but that isn't exactly a disaster. If you don't have enough to withdraw a lot, you won't pay a lot of taxes on the other end as-is, and you will have put more in on the other side, so you are net better off. So overall, I agree that pre-tax contributions should be maxed out first, but after that? if you have the opportunity to add another 26K/yr to a roth IRA, and you are making the kind of money where you can swing it, it's probably a good idea. (Note, I'm no expert. I'd be interested to hear why you think that saving in post-tax accounts is better than saving in roth IRA accounts, if that's what you are suggesting.)
- techslave 7y ago
  > eh, it conveys all the advantages of a roth IRA it does not. https://www.physicianonfire.com/value-of-backdoor-roth/ https://www.physicianonfire.com/value-of-backdoor-roth/ > believe possibly) stronger bankruptcy protections true, but at the significant cost of losing the ability to do tax loss harvesting on the (presumably) large amount you are investing through the back door. plus the withdrawals are taxed (regular Roth are bit but backdoor is).
  - lsc 7y ago
    so I think what I'm describing here is different from the link - my employer deducts post-tax money from my paycheck into the 401k, then rolls that over into something that will roll over into a roth IRA when I leave the company. As far as I can tell, that's what OP was speaking of (See the "Daily roth in-plan conversion" portion of the paycheck deduction screenshot.)

lsc 7y ago

eh, it conveys all the advantages of a roth IRA, plus (I believe possibly) stronger bankruptcy protections, (because it's rolled over from a 401K) - so assuming you can contribute to it (which is to say, you have money after maxing your pre-tax 401K) I think that it's a thing you should consider. Note, I think that maxing out your pre-tax retirement savings first is a good idea because it manages risk well; when you go to withdraw, you pay taxes based on how much you withdraw; If you are rich when you retire, you'll pay a lot of taxes, but that isn't exactly a disaster. If you don't have enough to withdraw a lot, you won't pay a lot of taxes on the other end as-is, and you will have put more in on the other side, so you are net better off. So overall, I agree that pre-tax contributions should be maxed out first, but after that? if you have the opportunity to add another 26K/yr to a roth IRA, and you are making the kind of money where you can swing it, it's probably a good idea. (Note, I'm no expert. I'd be interested to hear why you think that saving in post-tax accounts is better than saving in roth IRA accounts, if that's what you are suggesting.)

techslave 7y ago
> eh, it conveys all the advantages of a roth IRA it does not. https://www.physicianonfire.com/value-of-backdoor-roth/ https://www.physicianonfire.com/value-of-backdoor-roth/ > believe possibly) stronger bankruptcy protections true, but at the significant cost of losing the ability to do tax loss harvesting on the (presumably) large amount you are investing through the back door. plus the withdrawals are taxed (regular Roth are bit but backdoor is).
- lsc 7y ago
  so I think what I'm describing here is different from the link - my employer deducts post-tax money from my paycheck into the 401k, then rolls that over into something that will roll over into a roth IRA when I leave the company. As far as I can tell, that's what OP was speaking of (See the "Daily roth in-plan conversion" portion of the paycheck deduction screenshot.)