[wikibob]

Yes, what you want to look into if you have existing traditional-IRA dollars is the "Pro-Rata Rule". See: https://www.kitces.com/blog/the-impact-of-the-ira-aggregatio...

Backdoor Roth: Contribute $6,000 in after-tax dollars to IRA, Immediately convert IRA --> Roth IRA. File Form 8606.

Mega Backdoor Roth: Contribute a total of ($56,00 - ($19,500 + Employer Match)) as After Tax contributions to a 401K. Convert those funds to a Roth 401k.

Another detail, you may see discussion about avoiding the "Step Doctrine" for backdoor Roth contributions. This is no longer required as the IRS has blessed Back Door contributions, after an obscure footnote in a 2018 congressional report.

- Footnote Commentary: https://www.forbes.com/sites/ashleaebeling/2018/01/22/congre...

- IRS Explicitly Acknowledges: https://www.napa-net.org/news-info/daily-news/case-week-de-v...

- More: https://www.fa-mag.com/news/irs-finally-says-back-door-roth-...

- https://www.physicianonfire.com/backdoor/

- https://www.biglawinvestor.com/backdoor-roth-ira-step-by-ste...

[orliesaurus]

Thank you so much, you're giving out great advice for free..

[sombremesa]

While I agree that user wikibob is investing significant amounts of their time dispensing genuinely helpful advice, I would also like to point out that much of their advice sets you up for retirement, and is not going to be optimal for anyone who has other goals.

For best results, people (especially young people) should do their own homework and know their own risk tolerance and financial goals. Putting thousands of dollars towards retirement won't help you if what you really needed was to pay off your credit card, or to set aside money for your child's college, etc. etc.

[wikibob]

I completely agree.

If you have any unsecured debt (college, credit cards, vehicle) I would strongly suggest paying it off completely before doing any retirement savings.

If you have or plan to have kids, you need to investigate 529 college savings plans and determine the best mix for you of retirement versus 529 savings.

Getting into other uses for money such as founding your own startup (given we’re on a Y-Combinator website), I’d suggest thinking long and hard about your level of risk tolerance. If you’re happy with the risk, go for it! If you’d be happier knowing your retirement is completely secured from some years of high earning and high retirement savings, go for that.

A big key to retirement savings is really deeply understanding just how big the impact of compound interest is. Go pull up a compound interest calculator, graph a curve, something conservative say 7% growth rate over 20 years. Then do it over 40 years. The difference is amazing.

[ryandrake]

To add just a tiny addition to your excellent summary: Some employers’ plans also allow you to convert after-tax 401(k) contributions to your personal Roth IRA (as opposed to its Roth 401(k). Otherwise same as the mega-back door. You might prefer this if your Roth IRA gives you more flexibility in investments.

[wikibob]

Now that is a fascinating tidbit.

All this tax advantaged retirement savings is an almost entirely shadow-world when it comes to compensation. In tech places like http://levels.fyi has done amazing at leveling the playing field, but something small like an employer offering after-tax 401k, or only having horrible high fee fund options, makes a significant difference over the years.

Can you use a throwaway and name some names of employers that you know offer the after-tax-401k-to-personal-Roth option?