-
Mechanics for Making Contributions
-
1 Reply
-
I sent one of my clients to you. You have set up his accounts with his broker: Pre-Tax, After-Tax, and Roth 401k. If we are going to roll out After-Tax contributions out of the Plan, don’t we also need to set up a personal Roth IRA? That was not covered in your instructions. Then, we would transfer (roll out) contributions sent to the After-Tax account to the personal Roth IRA?
-
Yes. If the goal is to move the voluntary after-tax contributions out of the Solo 401(k) as part of the Mega Backdoor Roth strategy, a personal Roth IRA is needed to receive those funds.
The after-tax Solo 401(k) account is simply a holding account for the after-tax contributions. Those funds are then transferred (rolled over) from the after-tax Solo 401(k) account into the participant’s personal Roth IRA. Alternatively, the plan also allows an in-plan Roth conversion to the Roth Solo 401(k) account, so opening a personal Roth IRA is only necessary if the client prefers the Roth IRA route rather than the Roth Solo 401(k).
Learn More: https://www.mysolo401k.net/mega-backdoor-roth-solo-401k-transfer-to-roth-ira/
Log in to reply.