I didn’t think to look at transaction minimums, just balance.
Exactly. This is why Roth is the way to go.
You can pull most of it out in 10 years and spend it on lawyers and hookers and blow and a submarine and financing third world guerillas. Can’t do that with a traditional.
Update to the update: Deposited my $0.07 check just now… and feeling very flush! Also a little bit dangerous… I’m living on the edge and taking an early distribution that is subject to a penalty. I’m pretty sure that makes me a badass.
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Halfway serious - take that, buy a few hundred shares of cryptos trading at like $0.0002, see what happens!
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If you had any sense you would take it in substantially equal periodic payments.
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So let’s say I am at the point where I want to invest in a Roth IRA. I already max my 401k contribution. Can I contribute even more to a Traditional IRA that I plan to rollover to a Roth IRA?
I always maxed my employer’s 401k due to a high state tax marginal rate. I figure for every dollar I put into a 401k today, I’ll save 24 cents on federal tax and 9 cents on state tax (33% marginal rate), but only withdraw at an average tax rate of (assuming no change in rates) of 16% in the future.
Is there an argument to using the Roth 401k option through my employer? Is the Roth IRA backdoor still viable when I already max my employer’s 401k?
At the marginal tax rates you’re quoting, probably not. The only way it would make sense for you would be if you plan to have incomes at or above your current AGI in retirement or if you take a very pessimistic view of future tax rates. Based on what you’re saying, it seems like neither applies (although you want to compare marginal tax rates now vs in retirement, not compare marginal vs. effective).
Yes, absolutely. If you have any pre-tax traditional IRA $ though, you want to roll it over to your 401k by the end of the year because otherwise the pro-rata rule applies. If the balance is small enough that you’d rather convert all of it and pay taxes now, that’s fine too.
Okay so it’s literally as easy as rolling my Traditional IRA into my employer 401k, contributing $6k to a traditional IRA, and rolling it over immediately to a Roth IRA? Seems like there’s no downside apart from a small increase in expense ratio with my current employer’s 401k options.
Yes, you are correct.
Yep! The backdoor Roth is even easier than a rollover. Vanguard has a “convert” button that magically does it all with no additional paperwork / calls with real people, so I just contribute to my traditional IRA, wait for it to show up, and then hit the convert button to send it to my Roth. I assume it’s just as easy with other companies.
Do I need to open a Roth IRA, or will the “convert” button create one for me? I don’t want to have to wait a few weeks for the account to effect. And is the contribution limit correct? Can I throw in 6k for me, and then have my wife throw in 6k to hers?
Looks like you can create the account at the same time as the conversion, but the process will look a little different the first time (you do the conversion at the time you open the Roth). Then next year you can use the convert button.
https://investor.vanguard.com/ira/how-to-convert-traditional-ira-to-roth-ira
The contribution limits are the same as the typical limits ($6K for < 50, $7K for >= 50) because they’re based on the traditional IRA limits and you can definitely do a backdoor Roth for each of you.
Did you forget the red font? I am a big Vanguard fan due to the low fees, and the vast majority of my non-IRA assets are there. Their customer service, including phone service, used to be excellent, but I no longer feel that way. If it’s not a transaction I can handle myself on-line, it’s a pain and there may be errors.
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I’ve mostly had great customer service from Vanguard, although there’s been some exceptions. If you get a not-helpful person maybe hang up and try again? 
Part of the problem is that you think all is set, but it isn’t.
One clear example: I was trying to gift some Vanguard shares to my daughter that she was going to sell to help with a down payment on a house. More tax efficient for her to sell them than for me to sell them. Vanguard rep on the phone assured me all was set and the transaction would go through. It was a joint account with my wife, and I asked the rep if he needed to talk to her. Answer: no. Seemed reasonable since the ownership was “Me OR Wife”, and without any question I alone could tell Vanguard to sell that amount and send the proceeds to our checking account (a joint checking account, but doubt that matters since if the proceeds were in the joint checking account I could withdraw them.) But in fact Vanguard’s rules are that gifts from joint accounts (over $5,000 maybe) need approval of both owners. We only found out when I inquired why the transaction hadn’t gone through. Got it done with about 3 days to spare when it should have had 3 weeks to spare. Aggravation we, and especially our first-time-homeowner-to-be didn’t need.
Second example, and I don’t really remember all the details, was that they screwed up my distribution elections. Partly my fault. I had dividends from some other Vanguard funds being deposited into a Vanguard money market fund. For reasons not important here, Vanguard decided to close that money market fund. They certainly told me the fund was closing. Maybe they told me at the time (probably, though I certainly don’t remember it), that meant that the dividends from other funds now got reinvested in the funds paying the dividends, when I instead assumed they would get paid in cash. Anyway, without complaining about dividends already reinvested (since probably my fault, even though it was a stupid default option), I called to get the option changed for future dividends. Didn’t get fixed properly, but by the time I realized it those funds had appreciated a little, so I didn’t argue, just asked again to have it fixed for future dividends. Same thing happened again, but again funds had appreciated slightly, so no harm. Then I found that it was something I could do online, so I just did it, and then it worked.
Especially annoying, and I remember no specifics, is that I ask questions by secure message, and get response by secure message to “Call us”, and then have long wait times for the call and can’t get a quick answer to the question then anyway, since that person needs time to determine what has happened, time that should be spent when they get the question via secure message.
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Wow, that does sound annoying. 
That sucks, I handle all my dividend reinvestments online.
My Vanguard whoopsie story is that they set my 401k contribution to 0% after I hit the employee contribution max. However, they did not set it back in time for my first paycheck the following year so I missed out on my employer match for my first paycheck of the year.
Great work guys!
if you have both pretax and post tax funds in your 401k, how do they determine which capital gains are taxable and which are not?
If they are in your 401(k), none are taxable.
As yankee tripper said, gains are not taxable as long as they are in your 401 k. If the 401k rules are the same as the Ira rules, withdrawals are taxed on the proportion of the account that is pretax. That’s not the same proportion as went in as contributions because all gains in the account before withdrawal go into the pretax bucket.