We're in a perfect situation to max out a Roth IRA with a Mega Backdoor from my wife's solo401k.
- Maxed out our IRAs, HSA, and my 401k, and about to get a significant windfall.
My wife's Vanguard solo 401k doesnt allow for the Mega Backdoor so I'm opening one w/ solo401k.com (open to recommendations). Will use her business income (she has enough) to put $66k into her 401k and roll it over to her Roth.
My questions are around the treatment of the after-tax 401k contributions needed for the MBD:
1. How are after-tax contributions treated with respect to contribution deadlines? I read the employee contributions must be made by the end of the tax year in which the 401k was established. So if I set this up now and move the end of her business tax year to Mar 30, can she contribute for 2022 (since the 401k will have been established prior to Mar 30)?
2. How are after-tax contributions treated with respect to contribution limits? From my understanding, they are considered neither employer nor employee payroll deferral contributions. I also have a solo 401k as well as one with my employer. If I max my contributions ($22,500) w/ the employer 401k, can I also contribute up to the $66k plan limit in the solo 401k, if I do those as a combination of employer profit-sharing contributions and after-tax contributions?
So if a couple has a job and each has a business (each of which earns at least $66k net), this could mean an annual contributions of:
Her Roth IRA (via backdoor): $6,500
Her Roth IRA (via Mega backdoor): $66,000
His Roth IRA (via backdoor): $6,500
His Roth IRA (via mega backdoor): $66,000 --> not sure if this number would be reduced by payroll contributions from the job 401k
Total theoretical Roth IRA contributions: $145,000
His Roth 401k: $22,500 + $1,350 (6% employer match)=$23,850
Total Tax-free contributions of $168,850 in a year.
Putting as much through the solo401k Mega Backdoor IRA as is possible
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