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:
- I contribute $6000 to my Roth IRA
- Throughout the year I contribute $19500 to my Traditional 401k
- Throughout the year my employer contributes $4875 to my 401k (by 25% match)
- Throughout the year I contribute $32625 to my 401k using after-tax funds
- 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?