Maxed Out 401(k) and No Access to the Backdoor Roth: What Are Our Other Options?
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Saving for retirement is an essential task that everyone should prioritize, and one of the most popular means of saving is through a 401(k) plan. But what happens when an individual has maxed out their 401(k) and doesn’t have access to a backdoor Roth IRA? In such a case, what other options are available?
First, let’s understand the concept of a 401(k) and a backdoor Roth IRA. A 401(k) plan is a workplace retirement savings plan that allows employees to contribute a portion of their pre-tax income towards their retirement savings. The contributions made to a 401(k) plan grow tax-deferred until distribution at retirement, allowing individuals to save a considerable amount of money for their golden years.
On the other hand, a backdoor Roth IRA is a saving strategy for individuals who cannot contribute directly to a Roth IRA due to the income limits imposed by the IRS. The backdoor Roth IRA involves making a non-deductible contribution to a traditional IRA and subsequently converting it to a Roth IRA.
So, what are the options for individuals who have maxed out their 401(k) and don’t have access to a backdoor Roth IRA? Here are a few options:
1. Taxable brokerage account:
A taxable brokerage account is an investment account that isn’t sheltered from taxes, and gains are taxed at the time of the sale. Although it may not have the same tax benefits as a 401(k) or Roth IRA, it’s a flexible investment account that can provide growth opportunities for retirement.
2. Health Savings Account (HSA):
An HSA is a tax-advantaged account available to individuals who have High Deductible Health Plans (HDHPs). Contributions to an HSA are tax-deductible, grow tax-free, and withdrawals for eligible medical expenses are tax-free. Once an individual reaches the age of 65, withdrawals for non-medical expenses are treated as taxable income.
3. Non-deductible Traditional IRA:
Individuals who cannot make deductible contributions to a Traditional IRA can still make non-deductible contributions, which can be used for retirement savings. The contributions grow tax-deferred until distribution at retirement, but only the earnings are taxed.
4. Deferred Compensation Plan:
Some employers offer deferred compensation plans that allow employees to defer a portion of their income until retirement. These plans offer tax benefits similar to a 401(k) plan, but the funds are generally not accessible until retirement, and they may have limitations on investment options.
In conclusion, maxing out a 401(k) and not having access to a backdoor Roth IRA doesn’t mean an individual cannot save for retirement. There are many investment options, including taxable brokerage accounts, HSAs, non-deductible traditional IRAs, and deferred compensation plans. It’s essential to consult with a financial planner to determine which investment options are right for your retirement goals and financial situation.
I'm quitting my job soon to start my business. I have a 401k in fidelity with my current employer, when I quit can i move it to my ira account with fidelity and use it for startup of my business
Why is it hard to figure out your after tax 401K if you have the exact amount each year that you put in yearly and keep records so when you are ready to take that money out , you know how much you can take out tax free. You just can’t take out the profits from that after tax till your ready to take out your RMD’s when your around 68 and over
1/2 my assets are in after-tax accts and 1/2 are in pre-tax. I really didn't plan that. It just worked out that way.
Max the HSA and invest it. Ask your HR if they have a the mega back door roth ira (post tax 401k contribution up to 58k). If you max the HSA, then stop using it (if you are) to pay medical expenses and use post tax money so the HSA can stay invested. If you're doing all those things, then a brokerage account (post tax) or paying down highest interest debt is where you should go.
What a difficult position to be in! Maxing out there 401Ks and still not at 25%. Geesh!
What does this person mean when they say “no access to back door Roth” … anyone can do a back door Roth.
HSA
Wait a minute.. I thought everybody can do a backdoor Roth IRA.. just do it with fidelity or vanguard.. what am I missing here?. Dave Ramsey is a millionaire, he does backdoor Roth.
Merci à Dieu and y'all for this video. I'm at 42% gross investing to help catchup. My plan in Dec is to put my after-tax-to-roth-conversion-contributions into my taxable brokerage account in Vanguard. Thank you for the validation.
In 20 years from now, I wouldn’t be surprised if politicians start trying to tax Roth IRA distributions.
Backdoor Roth is dying anyway.
At this rate it won't be long before Ira and 401k are taken away entirely
You guys are awesome.
Are you saying that if you contribute to both a traditional 401k and a roth 401k that you should have a separate account for it? Is it really that difficult to piece out the contribution amounts for each? My company offers both and I invest in both simultaneously. Will this create problems for me down the road?