Does a Traditional IRA/401k effect the Mega Backdoor Roth in the same way? by retiredjg Mon Sep 20, 2021 7:33 am, Post by retiredjg Thu Jan 20, 2022 3:19 pm, Post If you're looking for a non-prototype Solo 401k plan that would allow you to invest in alternatives or do a mega backdoor Roth IRA, check our MySolo401k. Hi Detra, my intention was not to suggest that mySolo401k messed up just that it looks like ETrade is now asking for separate applications. by catchinup Sat Mar 12, 2022 11:37 am, Post Have a question about your personal investments? 2022 Nabers Group. by retiredjg Wed Sep 22, 2021 7:50 am, Post For the accounts setup with mySolo401k (non-custodial retirement plan accounts) I dont think there are any eTrade forms to be used. Current ETrade customer here. Based on my 3-week ordeal of opening the accounts with ETrade, 1. submit the cover page that mysolo401 provides you with their system gets confused and your application will NOT be routed properly leading to massive delays, 2. submit all 3 applications as single package see #1 as a reason. by Soon2BXProgrammer Tue Feb 08, 2022 9:33 pm, Powered by phpBB Forum Software phpBB Limited, Time: 0.182s | Peak Memory Usage: 9.36 MiB | GZIP: Off. by dublin Tue Feb 08, 2022 10:04 pm, Post However, always work with your tax advisor to ensure proper reporting and filing of forms documenting the conversion of Roth funds. Here are some possible solutions, according to advisors. by dublin Thu Sep 23, 2021 5:17 pm, Post One person told me that a 3rd account could have the same plan name but would need a different sequence #, while another person told me that I would just have to try submitting the new application requesting same sequence # and see what response I get from Etrade (originally, this second person told me after consulting with her team that a new plan name would be needed for a 3rd account, but after further discussion with her operations team she said I'd just have to try submitting an application and see how Etrade responds). by aray Sat Apr 16, 2022 2:32 pm, Post Is this still a big concern for not doing this eTrade MBDR? Use the chat on the bottom right or call us at (877) 765-6401. I think I was told it would take 2 or 3 weeks to receive the corrected 1099s, and it took around 10 days in my case. No taxes are due on converting voluntary after-tax contributions to Roth, Voluntary after-tax contributions are not the same as Roth contributions. I hear you nolesrule, but the code itself seems less clear. by aray Wed Dec 22, 2021 7:41 pm, Post The so-called "Mega backdoor Roth" requires a 401k that allows employee after-tax (non-Roth) contributions, and either 1) in-service withdrawal or 2) in-plan Roth conversion. Forums Solo 401k Mega Backdoor Roth Solo 401k Etrade AfterTax to Roth conversion. Is this really true? Please allow a few minutes for this process to complete. by retiredjg Mon Sep 20, 2021 10:23 am, Post Voluntary after-tax contributions are converted to Roth funds once they are in the plan. by aray Wed Dec 22, 2021 11:22 am, Post by HomeStretch Sat Dec 11, 2021 5:32 pm, Post I admire your persistence. Post If you do go to Forms and Applications | E*TRADE or Morgan Stanley Private Bank (etrade.com). Once you establishes the solo 401k/MBDR with them, is there any way to sever ties? The Prohibited Transaction Rules A Summary of the Important Cases, Capital Gains Tax and the Self-Directed IRA, IRA Asset & Creditor Protection by State, Including Lawsuits. She is the sole owner and employee of the S Corp. Amy establishes a Solo 401(k) plan and wants to maximize her Roth contributions. Part C. Nondeductible Employee Contributions. Learn more about George Blower and My Solo 401k Financial >>. If yes enter the name of the ultimate beneficial owner and ultimate beneficial owner's tax . The only issue is a traditional IRA. Weve updated Section 3, Part C of our Adoption Agreement to "No" to address this change. I am interested in in-service withdrawals, after-tax contributions, and ability to roll traditional IRAs into the plan. The cover letter is a best practice/best effort step to clarify and explain the account objectives to E*Trade including why three (3) account applications are being submitted for those . Contains spam, fake content or potential malware, https://www.mysolo401k.net/mega-backdoor-roth-solo-401k-transfer-to-roth-ira/, https://www.mysolo401k.net/solo-401k/how-to-guide-mega-back-door-roth-solo-401k-conversion-of-e-trade-investment-only-non-custodial-retirement-plan-self-directed-solo-401k-brokerage-account-to-roth-solo-401k/, https://mysolo401k.net/mycommunity/forums/discussion/etrade-brokerage-accounts-designation/, 1099-R Trying to find an answer to this question while filing with Turbotax, How to report multiple conversions via the conversion form, ROBS 401K Expenses Accountable Plan For Expense Reimbursements, 5 Essential Real Estate Investing Tips From Successful Investors, Pros and Cons of Borrowing From Your Self-Directed 401K. MySolo401ks process had 6 files to be uploaded. Most financial institutions will provide you with complimentary Solo 401(k) plan documents for opening an account. I haven't started entering items into TurboTax so I can't assess the impact of this value. $153,000 for single filers. Today, we tackle questions about withholding taxes, new rules with the Roth 401(k), maximum allowable contributions to combined retirement accounts, when you should roll your 401(k)s from multiple companies into one account, and so much more. You still can, even without using an IRA. by nerdymarketer Tue Jun 21, 2022 2:18 pm, Post Open an Account here >> If I wanted to convert to a Roth IRA outside E*Trade is there a different process/form to be followed in that case? If everything goes smoothly, I will fill out the form for tracking the conversion. I can then immediately do the in plan Roth rollover to move these funds to the Roth 401k account. Our products and services provide our clients the freedom to invest their retirement savings in their own business as well as alternative investments such as real estate, private companies, promissory notes, precious metals, tax liens and equities. It only works if you already have an account with them. If your employer does make . I have to click on edit in account preferences and change the name to Roth401k and the same goes with the other accounts respectively. Please see more regarding the steps at the following link: https://www.mysolo401k.net/mega-backdoor-roth-solo-401k-transfer-to-roth-ira/. That maneuver is called the mega backdoor Roth. Thanks a ton for all your research on this @aray! No matter how simple or complex, you can ask it here. I have only 1099 income and currently contributing the max $22,500 employee limit plus 20% of income as employer to my solo 401k. The documents are important because they dictate what you can and cannot do under the plan. While traditional 401 (k) plans have a 2022 contribution limit . Use E-TRADE for Mega Backdoor Roth Solo 401k QUESTION: . Check the application, it looks like all the elements are there:https://content.etrade.com/etrade/estation/pdf/Qualified_Retirement_Plan_App.pdf Page 13: Part A. Elective Deferrals Authorization of Elective Deferrals Will Elective Deferrals be permitted under this Plan (select one)? Please confirm you want to block this member. Thankfully, the Build Back Better bill was not passed and never became law. Note: If you already have a Solo 401k through My Solo 401k and your accounts are E-Trade, this change will not impact your accounts. Is it just a matter of me transferring funds between accounts or is there a separate conversion process to be followed? Exclusions may apply and E*TRADE reserves the right to charge variable commission rates. Investors love to contribute and use Roth funds because of their tax-free growth. I'll also keep track of contribution amounts and in plan Roth rollover amounts on my own in Excel. Thanks for sharing your experience as we certainly strive to make the process as easy as possible for our clients. E*TRADE charges $0 commissions for online US-listed stock, ETF, mutual fund, and options trades. He emphasized that it's on me to make sure I'm keeping accurate track of contributions and distributions. Especially when the rules keep changing like they did with the recent Secure Act 2.0. Forums Solo 401k Solo 401k Brokerage Account ETrade. E-Trade does not charge commissions on stock or exchange-traded fund (ETF) trades for its Roth individual retirement accounts (Roth IRAs). by StringTheorist Mon Dec 17, 2018 8:37 pm, Post by retiredjg Thu Jun 30, 2022 4:51 pm, Post Hence, the notice was the catalyst for making the Mega Backdoor Roth 401(k) strategy possible. Roth 401k contributions can roll into a Roth IRA almost any time. I continue to get the feeling that etrade has just not yet worked the bugs out of their plan or at least spread that information to all of the representatives who are trying to answer questions. Thanks, and fair enough. Post Bond trades are $1 per bond for online secondary market . 6) For rollover, aray you said "As far as tax reporting when doing the in plan Roth rollover - Etrade would issue me the 1099-R, and I would set the record straight on the 1040 as far as what amount of the rollover is taxable vs. non-taxable" Are you saying since eTrade won't distinguish what the rollover is for and taxable or not, they'll simply put the entire rollover amount on on box 1 Gross Distribution, and leave everything else blank? It is simply a (second) traditional 401k account, and when you make contributions to it that you do not later deduct on your tax returns, those contributions are 'after tax contributions'. To exercise a Mega Backdoor Roth Solo 401k, the plan documents must contain: Your Nabers Group Solo 401k contains all the elements needed for the mega backdoor Roth strategy. Obviously this will be when we no longer need to fund additional MBDR thru their after-tax contribution account. 3) what's the deadline for making the employee contribution (either elective deferral or NDEC)? This action will also remove this member from your connections and send a report to the site admin. by aray Sat Apr 30, 2022 7:33 am, Post Inevitably, there will come a day when the Mega Backdoor Roth will be on the chopping block again. But not everyone can contribute to these accounts . Agree that E-Trades abrupt plan change was poorly handled. In contrast, the Roth IRA maximum contribution limit is $6,000 or $7,000 for 2022 . Hi everyone, I wanted to report that I did notice a couple inaccuracies on my 1099s received, however after pointing them out to Etrade, I'm satisfied with the resolutions and the corrected 1099s that I received. Investors love to contribute and use Roth funds because of their tax-free growth. So sounds like I got a month to fund the contributions. Suboption (b): No. Alert! It allows savers to contribute up to the maximum $61,000 in a 401(k) and maximize the tax protections on all of those savings. I'll just mention lazerasa, since you are new and have may not have seen previous discussionsit can be risky to try to administer your own Solo 401k with mega-backdoor if you do not have previous experience in this area. However, some plans allow you to rollover after tax into the ROTH portion of your 401k or 403b (or even an external ROTH IRA) - part of a mega back-door. A separate account can be used for the after-tax (non Roth) contributions, but that's not required. As a quick update, I submitted my application yesterday to Etrade to establish the 3rd account to be used for after tax employee contributions, and it was approved and opened today! The brokerage firm has a traditional and Roth solo 401k option. Pre-tax, Roth, and Voluntary After-tax). As plan admin, other than the detailed records we should keep, how are we to report contributions to IRS, either pre- or after-tax? It only works if your 401 (k) plan allows for after-tax contributions and in-service distributions of after-tax funds. Youve probably found it already, but for future reference, the ETrade form for in-plan Roth conversion is here: https://content.etrade.com/etrade/estation/pdf/directin-planrothrolloverrequest.pdf. Prior to IRS Notice 2014-54, doing a Backdoor Roth was not as attractive as there was some uncertainty as to how the after-tax 401(k) funds can be rolled over to a Roth IRA. Defined Contribution (DC) plan employee + employer contributions are limited to the lesser of the 26 U.S. Code 415(c)(1): (3) Participants compensationFor purposes of paragraph (1), 401(c)(3)(B) Special rule for self-employed individuals, 401(c)(2)Annual additionFor purposes of paragraph (1), the term annual addition means the sum of any year of. Post Cancel. I called Etrade to report the issues, and followed up with messages to Etrade as well (I sent the follow up messages immediately after the phone call, just so I'd have a written record of my requests). You can trade stocks and ETFs for $0. This is why the conversion of voluntary after-tax solo 401k contributions has been dubbed the "mega-backdoor Roth solo 401k." There is a lesser-known rule called the "overall 415 limits." The overall 415 limit for 401(k) plans including solo 401k plans. The backdoor process is one where you convert the balance in your your trad IRA to Roth, and you . Will Roth Elective Deferrals be permitted under this Plan in addition to Pre-Tax Elective Deferrals? by dublin Sun Sep 19, 2021 11:34 pm, Post Statutory Limit 2018 = $55K or 2019 = $56K. In the context of a solo 401k, this only comes into play when the profits of your business aren't enough to get . Can I Still do a Backdoor Roth IRA in 2023? I've called Etrade a couple more times and gotten mixed messages about the ability to set up a 3rd account for the after tax contributions. Eventually when distributions are made from the Roth 401k account, the first distributions are considered a return of the contributions, and then after contributions are used up any remaining distributions are considered earnings. This page was generated at 07:36 AM. by Iteb Mon Mar 21, 2022 5:20 pm, Post Amy, who is under the age of 50, has an S Corporation and earns $80,000 in compensation. Thank you @aray, @dublin. For the Roth 401k account, I don't need separate accounts for Roth 401k elective deferral contributions and amounts rolled over or converted to the Roth 401k. You can hand over management of your solo 401k to E-Trade Capital Management. Seemed to work flawlessly. For the 2023 tax year, the limits are: $228,000 for married couples filing jointly. if not necessary. It is important to remember that in order for funding a backdoor Roth IRA to be a tax-neutral event, you must not . Vanguard Solo 401 (k) Vanguard is another popular option for solo 401 (k) accounts. by HomeStretch Thu Jun 30, 2022 4:59 pm, Post What To Do With Your 401(k) When Changing Jobs, Use your IRA or 401(k) as your Bank Episode 349, We dont share your personal information with anyone. By contributing money into the Solo 401k plan, you can convert those dollars to Roth funds. Please join 7/6/2022 at 1 PM Pacific/4 PM Eastern as Harvard Law Attorney George Blower reviews the options for E*Trade individual 401k account holders in response to E*Trade's decision to no longer support non-deductible employee contributions (Mega Backdoor Roth Solo 401k) for its individual 401k plans. . I'll only be making employee elective deferral contributions directly to my Roth 401k account, so with this plan any time a traditional 401k account statement shows an "employee contribution", that will always mean it's an employee after tax contribution. The Mega Backdoor Roth is the only strategy that will allow a self-employed individual or small business owner with no employees to contribute up to $61,000 of $67,500 in 2022 ($66,000/$73,500 in 2023) in a Roth and potentially get immediate access to the cash. Please join 7/6/2022 at 1 PM Pacific/4 PM Eastern as Harvard Law Attorney reviews the options for E*Trade individual 401k account holders in response E*Trade. Whether the earnings are from Roth contributions or after tax contributions rolled over to the Roth account (earnings while in the Roth account), will not matter, I've been told. MBDR here I come! Or is there a rule that I need to max out the $19.5k elective deferral (into Roth 401k as preferred) before tapping into the remaining amount? Please be sure to submit the online form linked in the procedure page linked above to let us know the information needed to prepare the 1099-R to report the transfer of funds from the after-tax solo 401k sub-account to the Roth IRA. 2023 - My Community. by StringTheorist Tue Dec 18, 2018 7:13 am, Post by sarabayo Wed Dec 22, 2021 9:30 pm, Post With normal elective deferral contributions, you'd have to initiate a rollover in order to do that (I think that's the right terminology here), and there . Contact IRA Financial at1-800-472-0646or fill out the form to learn more about opening a self-directed retirement account. Do In Service Distributions Or Non-Hardship Withdrawals into a TD Ameritrade Traditional IRA, so I can then do a Mega Backdoor Roth IRA conversion from there? Then once the traditional 401k is back to a $0.00 balance, I could make an employer contribution if wanted to, and I'd repeat the same in plan Roth rollover process to get the traditional 401k back to $0.00. by Spirit Rider Mon Dec 17, 2018 9:29 pm, Post Earned 40 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor. 1) aray, is there any reason/benefit that you're not rolling the Nondeductible Employee Contribution (NDEC) amount into a Roth IRA, which I thought is more flexible than Roth 401k? by aray Wed Dec 22, 2021 5:07 pm, Post by nerdymarketer Tue Jun 21, 2022 5:30 pm, Post It seems they process these documents the same way they process the ones that were sent through internal messaging. It looks like for the contribution, I will be able to do an online transfer of funds to the AfterTax account. In early August 2022, the Senate passed the Inflation Reduction Act, which does not contain any provisions or restrictions on retirement account investments, Roth conversions, or the Mega Backdoor Roth 401(k). The Solo 401k Roth limits are much higher at $22,500 but still what if you could get more after-tax dollars to grow tax free? A mega backdoor Roth is a retirement plan for high-income earners who want to enjoy the benefits of a Roth account. by sarabayo Mon Dec 17, 2018 8:47 pm, Post 04-25-2022, 07:24 AM. by aray Thu Dec 23, 2021 8:52 am, Post My new employer only gives me an option to choose traditional and/or roth 401k (no after tax) with FXAIX as one of the large cap option with the lowest expense ratio of 0.015% out of all the fund options. Promo: MySolo401k. As a habit, I'll do an in-plan Roth rollover immediately after making a contribution to the traditional 401k account, whether it's an employee after tax contribution or an employer contribution, and I'll only make a new contribution to the traditional 401k after I've zeroed out the account via in-plan Roth rollovers. Cryptocurrency services provided by Gemini Trust Company LLC. However, the Mega Backdoor Roth is difficult to accomplish in an employer 401(k) plan due to the ERISA plan testing rules. My experience with ETrade in December of 2022 was identical. a-little-known-back-door-trick . by Iteb Mon Mar 21, 2022 5:34 pm, Post What should have taken a couple of days ended up taking 2-3 weeks. You will not get this with a typical, free brokerage solo 401k. It's possible to split contributions between the two. Learn more about Mark Nolan and My Solo 401k Financial >>. It's an individual retirement account, so you would open one up for yourself and your spouse would open another one for themselves. Most of the media attention driven by the proposed tax bill centered on the increase in corporate tax rates, long-term capital gains rates, and the elimination of various estate planning techniques. I just got a mass email from eTrade that they're removing it for everyone, even those grandfathered in: Effective immediately, non-deductible employee contributions are no longer an eligible contribution type for Individual 401(k) and Roth Individual 401(k) plans established using the plan documents made available by E*TRADE. Before we dive into the details, some background info is required first. You can roll over funds from existing SDIRA, Solo 401k, traditional IRA, 401k, 403b, TSP . Notice 2014-54 allowed for pretax and after-tax funds, that were distributed from a plan on a pro-rata basis, to be separated once a distribution is made. The CPA advises that I need to keep track of contributions to the Roth 401k account in terms of elective salary deferral amounts and rollover amounts, but once funds are in the Roth 401k, the CPA doesn't see any need or benefit to keeping track of the earnings in the Roth account (as far as what amount of earnings are attributable to elective salary deferrals vs. attributable to rollover funds). ROBS 401K Expenses Accountable Plan For Expense Reimbursements, 5 Essential Real Estate Investing Tips From Successful Investors, Pros and Cons of Borrowing From Your Self-Directed 401K, 1099-R Trying to find an answer to this question while filing with Turbotax. This offers . To help get you started, here's why the Vanguard S&P 500 ETF ( VOO -1. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. by mul Wed Apr 27, 2022 4:28 pm, Post The mega backdoor Roth Solo 401 (k) plan strategy is the holy grail of Roth tax planning. The result? You can do the non-deductible contribution to the 401k above the $19,500 limit, and then roll it into a Roth 401k. Contributions to Roth IRA have a ceiling of $6,000 per year. Mega Back Door Roth E-Trade QUESTIONS: I am looking to set up a solo 401k with you all with an eTrade brokerage account. by Iteb Fri Mar 11, 2022 7:20 pm, Post by gopack3 Tue Jun 21, 2022 2:30 pm, Post Looking at the slides you have for MegaBackdoor Roth processes, it looks like I would need to convert these funds. Once you convert after-tax funds to Roth, they cannot be turned back! In order to close so-called "backdoor" Roth IRA strategies, the bill eliminates Roth conversions for both IRAs and employer-sponsored plans for single taxpayers (or taxpayers married filing . by aray Mon Sep 20, 2021 11:04 am, Post Step 2: Contribute your Roth 401 (k) Next, in order to build that "Mega Backdoor Roth", you need to max out your annual contributions to your Roth 401k. Please confirm you want to block this member. That leaves about $21,000 as your maximum non-Roth after-tax contributions. What the employee does outside of their employer is invisible to the employer. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. The Mega Backdoor Roth 401(k) strategy is here to stay for the foreseeable future. No guarantees are made as to the accuracy of the information on this site or the appropriateness of any advice to your particular situation. I believe an example is the best way of highlighting the benefits of the Mega Backdoor Roth strategy: In sum, for a Roth lover, the Mega Backdoor Roth strategy is a powerful retirement strategy for maximizing Roth benefits. Effort: 5-10 hours (3-4 weeks) ROI: $ 360 setup fee + $15 per mo for 15 - 37% on crypto gains. I now have three solo 401k accounts at Etrade, all under the same plan name and sequence number, and all accessible with the same user login profile: Sorry, I just saw your message - yes, I made a contribution to the new after tax account within my Etrade Solo 401k and immediately did an in plan Roth rollover of those funds. We help our clients take control of their retirement money. Almost all brokerages say the employee part needs to be made by 12/31, but IRS Pub 560 says "Owner/employees: The employee deferrals must be elected by the end of the tax year and then can be made by the tax return filing deadline, including extensions." Once you make the voluntary after-tax contribution, you can either convert those funds in-plan to be part of your Roth Solo 401k, or withdraw/rollover those funds to your Roth IRA. I'll paste the messages to Etrade below with follow up comments: Thanks for this great topic! The tax proposals were approved by the House of Representatives as part of Build Back Better reconciliation legislation. On the positive side, an increasing number of employers have added Roth options to 401 (k) plans. Accounts respectively establishes the Solo 401k with you all with an eTrade brokerage account month to fund additional MBDR their. $ 19,500 limit, and then roll it into a Roth account same with! 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Self-Directed retirement account the code itself seems less clear Back Door Roth E-Trade QUESTIONS: i interested... Interested in in-service withdrawals, after-tax contributions are not the same goes with the recent Secure Act 2.0 more the.