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Both my wife and I have small Roth IRAs, a 401K and a 403B as well as separate traditional IRA accounts our combined income is now too high to contribute do I have the option to transfer my 401K after tax savings to one or both of our existing Roths upon retirement? Looking to retire in ~ 2-3 years wondering if it makes sense to maximize additional after tax 401K savings now...thanks for your feedback!

Should your title actually say "Mega Back Door Roth"?

When you say wondering if it makes sense to maximize additional after tax 401K savings now it sound like you are talking about a Mega Back Door Roth, where you max out your 401(k) with either Traditional or Roth contributions (depending on your tax situation) and then make after tax contributions to your 401(k) and convert those after tax contributions to either a Roth sub account within the 401(k), or to a Roth IRA. (If you convert to a Roth sub account in the 401(k), then you can roll to a Roth IRA when you leave your employer.)

I would say that if you were planning on investing that money anyway, that doing the Mega Back Door Roth is a great strategy. In fact, it's so good that I would suggest trying to adjust your expenses down so that you can come as close to maxing out your after tax contributions as possible.

A "Back Door Roth" (as opposed to a "Mega Back Door Roth") is when you make after tax contributions to a Traditional IRA, and then convert that contribution to a Roth IRA shortly afterwards. If you don't have any other Traditional IRAs, you can do this conversion with little/no tax impacts. Unfortunately, when you have a Traditional IRA, you end up getting hit with the 'pro-rata' tax rule, and generally end up paying a lot more in taxes. However, there is a way around this rule, if your 401(k) plan allows rollovers from a Traditional IRA - you can roll your Traditional IRA into your 401(k). That will leave you with no money in your Traditional, so that you won't get hit with the pro-rata rule on the conversion. That would allow you to make Roth contributions, even if you are over the income limit to make contributions to a Roth IRA.

AJ
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