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tween the hedges
Atlanta Falcons Fan
Member since Feb 2012
19768 posts

401k to Roth IRA conversion
A little backstory, I’ve been at my current job for a year so I’m eligible for a 401k with a match now. I don’t plan to be here more than 6 more months or so but they’re offering a 4% match in the meantime. I’ve never had an account as it’s pretty rare in my line of work. I do max my Roth every year and like the idea of tax free withdrawals in retirement. Other than that, I’ve been Dave Ramseyish and prioritizing my high interest student loans over retirement savings.

I do have 50k+ cash in the bank that I’m holding on to until the government resumes interest payments

Everywhere I’ve read said always take the match as it’s a 4% raise, but how difficult is it to add the money(probably 10k or so) to my Roth in 6 months? Is it as simple as just paying my tax bracket on the total convension when I file taxes next year? Would it screw with my back door contribution this or next year (already done this year)?

Thanks for any help. Hope this makes sense


down time
LA-Lafayette Fan
Member since Oct 2013
976 posts

re: 401k to Roth IRA conversion
Is the 401 a safe harbor plan? If there is vesting period you may never see the 4% match.


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120
Chitown_Badger
Wisconsin Fan
A one drink walk from Wrigley
Member since May 2013
21822 posts

re: 401k to Roth IRA conversion
quote:

I do have 50k+ cash in the bank that I’m holding on to until the government resumes interest payments


How long has that been sitting there? I had a bunch of cash in an interest bearing wealthfront account, but when the pandemic hit I saw the opportunity and dumped it into the market, which has obviously paid thousands of times the return.


UpstairsComputer
LSU Fan
Prairieville
Member since Jan 2017
954 posts

re: 401k to Roth IRA conversion
quote:

Everywhere I’ve read said always take the match as it’s a 4% raise, but how difficult is it to add the money(probably 10k or so) to my Roth in 6 months?


Why wouldn't you put your contribution in the Roth 401k and go ahead and pay the taxes and then just convert the 4%?

If the 4% is 10k in 6 months, why would you leave that job??

To answer the questions, it is that simple and should not effect your back door. Just do the conversion inside the 401k or upon distribution, make the conversion so it never hits your traditional IRA.
This post was edited on 7/2 at 9:27 am


tween the hedges
Atlanta Falcons Fan
Member since Feb 2012
19768 posts

re: 401k to Roth IRA conversion
Yes I hate seeing the cash there too but it’s money that I want to use to pay off student debt. As tempting as investing is, I know it’s risky to invest money you need short term.

I just don’t want to wire navient the money and have Biden write off 50k tomorrow so just holding out until interest and payments resume


tween the hedges
Atlanta Falcons Fan
Member since Feb 2012
19768 posts

re: 401k to Roth IRA conversion
Roth 401k isn’t offered.

I’m including my contribution as well as the employers, but yes it pays well. I’m just stuck in the freezing Midwest and want out once I get my debt under control.


Chitown_Badger
Wisconsin Fan
A one drink walk from Wrigley
Member since May 2013
21822 posts

re: 401k to Roth IRA conversion
I forgot about that potential. If it happens, the people who sent their last payment in the day before it passed are going to be majorly pissed


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30
UpstairsComputer
LSU Fan
Prairieville
Member since Jan 2017
954 posts

re: 401k to Roth IRA conversion
I can appreciate that thought process entirely.

I guess my only question now is, as such a smart person, why the hell you're a Falcons fan?


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10
UpstairsComputer
LSU Fan
Prairieville
Member since Jan 2017
954 posts

re: 401k to Roth IRA conversion
Then yeah, just make your tax payment next April.


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10
Auburn80
Auburn Fan
Member since Nov 2017
3940 posts

re: 401k to Roth IRA conversion
It usually takes 5 years to vest the company match. Whatever you put in is always yours. A few places vest faster, but you definitely want to find out what your rules are.


BamaAlum02
Alabama Fan
Huntsville, AL
Member since Nov 2005
792 posts

re: 401k to Roth IRA conversion
If it’s a safe harbor plan immediate vesting is required.


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