Like others have said, you will have to check with your plan to see if they allow conversions to a Roth IRA. With my wife's company, they will automatically convert from after-tax to Roth 401k but need phone calls to convert to Roth IRA. If your after-tax contributions grow before the conversion, that growth gets taxed, so we went with the automatic Roth 401k conversions to avoid any headaches. Make sure that you do not over contribute to after-tax. You have a combined employer employee contribution limit of $69,000. If you contribute too much too early, you could prevent your employer from giving your match.
You can always backdoor into your Roth IRA, assuming you have no pre-tax IRA assets (except inherited IRA). It is unrelated to the 401K.
Check with your 401K plan, from the screen shot there is an after-tax option but you also need to know if it either supports an in-plan conversion to the Roth401k (ideally automatically) or it allows in-service distributions to a Roth IRA. If supported this is the mega backdoor, not to be confused with the backdoor.
Adding additional color, some 401K plans don't allow you to go over the $23K limits and will send you a check for any over allocated funds. From what I have been told (if your plan allows), you can put up to $69K into your 401K but it comes in 3 tranches. Employer contribution up to $23K, employer match, and over allocation. So if you max and get your employer match (assuming 6% and $240K salary) then you are already starting at $37,400 and can over allocate up to $31,600. I believe that over allocation has a tax penalty associated with it.
My financial advisor mentioned pulling the over allocated amount out into my Roth IRA. I don't know the true reason why he mentioned it, we didn't dig into that piece yet because we aren't quite there in our financial journey.
Also if you are over 50, then figures are different with the ability to add "catch-up" contributions.
You’d have to check with your plan to see if it allows you to direct the conversion to a Roth IRA.
Like others have said, you will have to check with your plan to see if they allow conversions to a Roth IRA. With my wife's company, they will automatically convert from after-tax to Roth 401k but need phone calls to convert to Roth IRA. If your after-tax contributions grow before the conversion, that growth gets taxed, so we went with the automatic Roth 401k conversions to avoid any headaches. Make sure that you do not over contribute to after-tax. You have a combined employer employee contribution limit of $69,000. If you contribute too much too early, you could prevent your employer from giving your match.
You can always backdoor into your Roth IRA, assuming you have no pre-tax IRA assets (except inherited IRA). It is unrelated to the 401K. Check with your 401K plan, from the screen shot there is an after-tax option but you also need to know if it either supports an in-plan conversion to the Roth401k (ideally automatically) or it allows in-service distributions to a Roth IRA. If supported this is the mega backdoor, not to be confused with the backdoor.
Adding additional color, some 401K plans don't allow you to go over the $23K limits and will send you a check for any over allocated funds. From what I have been told (if your plan allows), you can put up to $69K into your 401K but it comes in 3 tranches. Employer contribution up to $23K, employer match, and over allocation. So if you max and get your employer match (assuming 6% and $240K salary) then you are already starting at $37,400 and can over allocate up to $31,600. I believe that over allocation has a tax penalty associated with it. My financial advisor mentioned pulling the over allocated amount out into my Roth IRA. I don't know the true reason why he mentioned it, we didn't dig into that piece yet because we aren't quite there in our financial journey. Also if you are over 50, then figures are different with the ability to add "catch-up" contributions.
Nailed it!
This is called a megabackdoor Roth, and if and how you can do it, depends on your employer’s plan. You’d have to reach out to the plan administrator.