MegaBackdoor Roth with Company Stock

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Joined: Fri Jan 13, 2023 9:07 am

MegaBackdoor Roth with Company Stock

Post by urkelfan »

I have looked into megabackdoor roth in my account, and while it seems possible, it may not be worth it. I have talked with a plan administrator who knew the rules, but had never heard of megabackdoor, so I wanted to consult here, where I first heard about the strategy.

-After tax contributions are allowed, but they must follow the same allocation as all other accounts (allocation can only be set in one place).
-Once per year, a distribution is allowed. They mail you a check and then you mail it to your brokerage, the transaction is free of fees.
-The catch is that the plan only allows distributions on company stock. For the non-company stock which is typical target date stuff, it will not allow you to withdraw while you are working at the company unless you are 59.5+.

Based on this, I have concluded that you can only really perform this activity properly if you put a large amount of money into your company stock. I am not completely against single stocks, but I don't like the idea of having a significant amount of money going into the company that also provides my employment. I do, however, work for a company that is a relatively safe value stock.

Has anyone ran into this before? If so, how did you handle this? I generally value simplicity, however, it can be quite a bit in tax savings (its all about risk+hassle / reward for me). Perhaps there is a workaround, such as converting to company for a short period of time, take distribution, and switch it back.

Thank You
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