Message Font: Serif | Sans-Serif
No. of Recommendations: 1
(based on your wording it seems like you would advise OP against the idea of after-tax contributions to her 401k too).

Correct. I find it too much work and not enough benefit to do such gyrations.

To clarify, my suggestion is to check the option of doing a back-door Roth contribution by putting money into a traditional IRA (not mentioned originally) and converting to Roth IRA. With the contribution limits of the IRAs, she would still have funds to save in a taxable account.

Thanks for the clarification as I was not understanding that this was your suggestion. That said, I don't care for this suggestion either. I keep going back to not understanding the motivation to stuff everything into a tax-deferred retirement vehicle because it locks too much money in those accounts that you cannot access until 59 1/2 without paying a penalty to get to your own money. Given that the funds are after tax anyhow, I would much prefer to just leave them that way and maintain the flexibility of being able to use my own money whenever I please for whatever I please without having to worry about paying a penalty for the privilege.

I think that if you are investing for capital gain, you're better off to pay the capital gains tax rate in a taxable account than what will probably be higher ordinary taxes when you take money from an IRA.

There is nothing magic about a retirement savings account that requires all retirement money to be in one. You can still use your taxable account for retirement money later.

As far as the back-door Roth conversion, there are rules around that as well if you have other funds in a Traditional IRA, but someone else will have to spell those out. I do know that it is not falling off a log to do this conversion, and there can be other tax ramifications.

It just seems to me that all these gyrations are not necessary. Just leave after-tax dollars in a taxable account, and invest as part of the entire portfolio.
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.