In my 401k plan I have the option to make after-tax contributions (This is different than Traditional/Roth type accounts)

Ignoring all gains for simplicity, my 2020 contributions end up like this:

  1. I contribute $6000 to my Roth IRA
  2. Throughout the year I contribute $19500 to my Traditional 401k
  3. Throughout the year my employer contributes $4875 to my 401k (by 25% match)
  4. Throughout the year I contribute $32625 to my 401k using after-tax funds
  5. I convert $32625 to my Roth IRA using backdoor Roth IRA conversion. This costs me $25 in fees.

So, I end the year 2020 having added a total of $63000 to my retirement accounts:

$24375 to my 401k ($19500 + $4875)

$38625 to my Roth IRA ($6000 + $32625)

My provider (Fidelity) provides a web-UI for performing the backdoor Roth IRA conversion. They charge me a $25 fee to do this.

They also offer automatic in-plan conversions for after-tax funds into Roth 401k with no extra fee.

If I setup automatic in-plan roth conversion for the after-tax money, will that change any eligibility for performing the backdoor roth IRA conversion in the future?

Are there reasons I might not want to use automatic in plan conversion?

  • When you say "in-plan roth conversion" do you mean converting from Traditional 401k to Roth 401k? In order to convert to Roth IRA you would need to take the money out of the 401k, and I don't think 401k plans allow that unless you have already left the company or you are of retirement age.
    – user102008
    Aug 24, 2020 at 16:48
  • No. I mean that I am adding after-tax contributions to the account. This is different than "Traditional" and "Roth"
    – Matthew
    Aug 24, 2020 at 16:57
  • "After-tax" 401k contributions contribute to the Traditional (i.e. non-Roth) 401k.
    – user102008
    Aug 24, 2020 at 17:32
  • I'm not sure I understand what you're asking me. I am able to, on demand, convert my after-tax 401k money into roth IRA money. I am charged $25 to do this. My "non-after-tax" contributions cannot be converted in this way.
    – Matthew
    Aug 24, 2020 at 17:36
  • When I say Traditional 401k, I mean non-Roth 401k. Any rollovers, conversions, or distributions from Traditional 401k is subject to the pro-rata rule, i.e. it must consist of both pre-tax and after-tax amounts (and all earnings are pre-tax) in the same proportion as in the Traditional IRA account overall. You cannot just take out, rollover, or convert just the after-tax amount and leave the pre-tax amount. This is true no matter if you convert it to Roth 401k, or take it out to rollover to IRAs.
    – user102008
    Aug 24, 2020 at 17:57

2 Answers 2


Really the only reason not to do the in-plan conversion is because 401(k)s typically have fewer investment options and sightly higher fees than IRAs. With an IRA you can invest in basically whatever you want including stocks, ETFs, and other investments while your 401(k) is pretty much limited to whatever mutual funds your employer has chosen to include in the plan.

If you're ok with that trade-off, the in-plan conversion is a good option. It's free, so you save the conversion fee. Also, they typically sweep after-tax contributions to your Roth account daily as soon as the contribution is made. This means there's no chance to accrue taxable growth in your after-tax funds before it's converted to Roth where the growth is tax-free.

Enabling the automatic in-plan conversion should have no effect on your ability to switch back to the old method later. You can always disable the automatic conversion.


I would ensure that your plan allows you to access the contributions that have been automatically converted in-plan to Roth, and that they're not locked up until you leave the company (or reach age 59.5).

One of the advantages of the mega backdoor method is that it allows you to access the contributions in excess of $19,500 at any time without penalty (because they have already been taxed and are no longer subject to plan rules, having been rolled out of the account into your own Roth IRA).

I personally am only comfortable exceeding the $19,500 pre-tax contribution limit with after-tax money (then converted to Roth) because I know that I can access those contributions if I need them for whatever reason before leaving the company or reaching age 59.5.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .