My Roth IRA crosses $100,000 (2011 – 2015)

From $0 in 2011, my Roth IRA reached $100,000 in 2015. I will explain in detail with screenshots everything that I did in these 4 years.

The below table summarizes the entire process from 2011 – till date 2015:

Six Figure Roth IRA ($100,000+)

Six Figure Roth IRA ($100,000+)

We will get into specific details but broadly speaking here is what I have done:

  1. Maxed out my Roth IRA contributions in 2011
  2. Maxed out my Traditional IRA contributions and rollover over to Roth every year (2012 – 2015)
  3. I maxed out my After-tax (Thrift) contributions to the 401k plan
  4. Periodically rolled over the After-tax 401k money to Roth IRA (paying taxes on earnings)

Let me break up the above table and explain each section in a little more detail, along with my commentary.

I maxed out my IRA contributions

Six figure Roth IRA ($100,00+)

Six figure Roth IRA ($100,00+)

Two things to notice here:

  1. I maxed out my IRA contributions every single year (IRS imposed limit of $5,000 in 2011 and $5,500 then on)
  1. I was able to make a direct Roth contribution in 2011, but I had to use the Back Door Entry to the Roth IRA 2012 onwards because my income levels have been high

Roth conversion of Traditional IRA

I performed a Roth conversion of my traditional IRA assets soon after I made the non-deductible traditional IRA contribution.

Six figure Roth IRA ($100,00+)

Six figure Roth IRA ($100,00+)

In case you are wondering why did I wait till 2013 to convert the 2012 traditional IRA contributions?

I contributed $5,000 in 2012 and $5,500 in 2013 to my traditional IRA account BUT performed a ROTH Conversion only once (for $10,500 in 2013). This happened because I made 2012 and 2013 contributions within a period of a few weeks – 2012 contributions were made in December 2012 and 2013 contributions were made in January 2013.

After-tax 401k plan contributions

Six figure Roth IRA ($100,00+)

Six figure Roth IRA ($100,00+)

I have had two 401k accounts in this time frame, we will call them 401k Plan-1 and 401k Plan-2. I maxed out my After-tax contributions.

This image provides a breakup of my After-tax 401k contributions between the 2 plans. Essentially I was contributing to 401k Plan-1 from 2012 – 2014 and I contributed to 401k Plan-2 for the year 2015.

I contributed $5,833 in 2012 (to 401 Plan-1), $17,763 in 2013 (to 401 Plan-1), $14,158 in 2014 (to 401 Plan-1), and $30,552 in 2015 (to 401 Plan-2).

Roth conversion of After-tax 401k

Six figure Roth IRA ($100,00+)

Six figure Roth IRA ($100,00+)

As I mentioned above, I periodically kept on converting my After-tax 401k investments to my Roth IRA. Here are the exact details of both the 401k plans in question.

In 2015, I did a Roth Conversion twice – once from my 401k plan-1 for $23,148 and the second time from 401k plan-2 for $31,104

 Taxes paid

Whenever I converted After-tax 401k amount to a Roth IRA, I did not have to pay taxes on the ‘contribution amount that is rolled over’ because that is already after-tax.

But I did owe taxes on earnings that the contribution amount has made in the 401k account. For example – In 2015, I contributed $30,552 after-tax to my 401k and it became $31,104 by the time I rolled over to a Roth IRA. I owe taxes on the difference ($552) – I will pay these taxes when I file my income tax returns.

Similarly, I have paid some taxes almost every time I rolled over After-tax 401k money. In fact, I try not to rollover After-tax 401k money to Roth IRA if I am making losses, I wait for it to be at least at the contribution amount or slightly more before moving it to Roth IRA.

Why? Because I might be able to avoid the hassle of a rollover – by the time this amount breaks even, I might have more After-tax assets to move, and I can move all of them together.

Remember – IRS taxes earnings in After-tax 401k rollover but does not provide for a capital loss deduction.

Frequency of After-tax 401k Rollover

Two factors determine how often you rollover your After-tax 401k assets:

  1. Your 401k plan restrictions
  2. Your willingness to take on administrative hassle for saving taxes

Since earnings on after-tax 401k assets are taxed, it is advisable to roll it over to a Roth IRA as often as possible, but doing it 24 times a year is a bit too much (once every pay check contribution).

My 401k Plan-1 had a limit of 4 times a year and I try to stick to that frequency and have been very happy with the results.

Plan for 2016

Current traditional IRA balance is also zero. So I will be able to use the backdoor entry to the Roth IRA again easily.

Current after-tax amount in both my 401k plans is zero. I no longer can contribute to the 401k Plan-1 but intend to contribute maximum allowed (Pre-tax and Post-tax) to the 401k Plan-2.

You can read here about the aggressive plans I have for 2016.

25 thoughts on “My Roth IRA crosses $100,000 (2011 – 2015)

  1. hey Bobby
    i saw your post on quora and followed the link. awesome, very informative. thanks a bunch. Pity, i didnt know the backdoor method without deductions for the traditional IRA. sigh

    • crap, i didnt know about 401K earnings being taxed. Is it for real?
      I am hurting bigtime with losses in both traditional and ROTH IRAs – i really wish there was some way to take a deduction on the losses. do you happen to know of a way?

      • Not many people know about it, BUT there is a way to deduct losses on traditional IRAs as well as Roth IRAs.

        In order to claim a loss, you need to withdraw all the balances from all the IRAs of the same type (traditional or Roth). So if you would like to claim loss deduction on your Roth IRAs, you need to withdraw all the balances from all the Roth IRAs that you have (it could be one or it could be multiple).

        If the money that you are able to withdraw is less than the non-deductible contributions (or after-tax rollovers) you made over the years, then you can deduct the difference.

        1. You can claim this loss only if you itemize your deductions and this loss deduction is subject to the 2% AGI floor
        2. This loss is added back to taxable income for AMT (Alternative Minimum Tax) purposes

    • We all started some day. There is only one day you can start – today… you cannot start yesterday and you cannot start tomorrow 🙂

      I am glad you are here, in the coming days we will fix everything so that you pay the least amount of taxes.

  2. Bobby! I am absolutely floored that I did not find this site earlier. I have been glued to all of your post blogs and articles for the past several hours.. “absorbing”. 🙂 I’ve been a private consultant for the past several years and I’ve managed to accumulate a bit of cash. But there are two things – 1. I know I need to invest it other than a savings account. But 2. I’ve actually become a bit overwhelmed trying to understand the scope of the investment world in addition to my sad realization that the past several years have been a bit too emmersed into work and not enough into managing my personal finances :-////
    That being said, any help I will take!!!! You’ve already clarified a few details regarding p2p platforms, Roth conversion, and gold(!) and I am looking forward to reading anything else you might feel like posting in the future!

    Thanks and waiting for your post on 401k’s. 🙂

    • Deli, thank you for appreciating my posts, it’s nice to hear ‘absorbing’.

      Let me start by telling you a short story about my life. I smoked cigarettes (regular tobacco – nothing outrageous) for a few years. I tried quitting several times but it never worked for more than a couple of days. Then one fine day, I do not know what happened/ changed but I gave up smoking – effortlessly. The best explanation I can think of is ‘It was my time to quit’.

      I do not know how relevant that anecdote is to your situation but you stumbled upon my site today because it is your time, right now and right here. And I promise you that I will do everything in my power to help streamline finances as quickly as possible.

      You also do not need to feel ‘sad’
      about being a bit too immersed into work and not into managing your personal finances. Most people I know (if not all) have a natural tendency to drift either into ‘too much money making’ or ‘too much personal finances’. I am guilty of the second one – I spend too much time on my personal finances. Overall, financially, I would do better if I spent more of my total ‘enthusiasm’ on my career.

      Do not get me wrong – I have an absolutely amazing career that pays well, but still if I would evaluate the ‘total returns’ on 1 hour incrementally spent on my career vs my managing personal finances, I think the number would still be higher for the career. But so what? I am doing what comes naturally to me – and that is personal finances research and implementation for myself and for others.

      About the 2 points you raise:
      “1. I know I need to invest it other than a savings account”

      “2. I’ve actually become a bit overwhelmed trying to understand the scope of the investment world”
      Investment world can be very daunting, for 2 reasons – greed and greed.
      A. Greed – of the investor
      B. Greed – of the finance professionals

      A. Greed – of the investor
      It is fairly easy to track the market – If you keep reading all my posts and do not know how to do it within 3 months, I would consider that as my failure.

      The greed comes in when you try to outperform the market. You are not happy with the 10% return that the market gives you. And in order to achieve higher returns, you take higher risks. Either you try to cheery pick stocks OR you try to use complex derivative products.

      B. Greed – of the finance professionals
      All professions are conspiracies against the laity. How will all the finance professionals make money if you (the common man/ woman) are able to understand everything. You will not pay them thousands of dollars every year just to manage your investments and taxes. Therefore, it many a times, seems like a conspiracy that they keep inventing jargon and confusing the masses so that their professions thrive.

      I have a high respect for competent finance professionals but those are far and few between.

      To begin your “Getting rich…..a journey we will take together”
      – start thinking about your time horizon. You are right that the money has to come out of savings account but where should it go? The answer largely depends on the time horizon (which in turn determines your risk appetite).

      If you say, you are contemplating buying a house in 2016, then you need money for the down payment.

      If you say you are 35 years old, have a stable income flow, and do not plan to retire till 50; then you can afford to place bulk of your savings into equity investments (as opposed to bond investments).

      So, start thinking along those lines – when do you need the money? Are you comfortable if your portfolio of investments goes up and down in between now and your retirement? S&P 500 returned 10% annually over the last 28 years BUT it lost 40% in 2008 – many investors panicked and withdrew their money. If those investments were not liquidated, they would have tripped by 2015.

      • Bobby, just wanted to say thanks for the extensive and informative response! Your cigarette story is completely understood as that is how I am feeling about learning more about the particulars of my finances right now. 🙂
        How can I not sign up for the “getting rich together” journey. There has never been harm in learning anything new ESPECIALLY when it might earn you some extra money. So, im all aboard. 🙂
        Also, just received a flyer a couple of days ago to open a bank account for cash, so your most recent post “making money by moving money – 1” …. perfect timing.

        • Deli,

          Great. Thanks for the feedback about “making money by moving money – 1”. I was really in two minds whether to post it or not. This is perhaps the ‘lightest’ (simplest) post on my blog till now. I usually write heavy / thorough/ detailed stuff.

          I am so glad that it resonated with the flyer you received. Its like called the ‘Red Car Effect’ – When you buy a Red car, you suddenly start to see a lot of Red cars on the road. Similarly, right now you are in the ‘make personal finances even better mode’ so you will see positive re-assuring stuff all around you 🙂

          I am here to answer any questions ….. we will take this journey together.

  3. Bobby,

    Fantastic post! I learned something new from your blog as usual! 🙂

    Can you please clarify how you are able to rollover 401K “4 times a year”? I thought you cannot do this if you are still working for the same employer, unless you’re already older than 59 ½.

    – Sergey

    • You are absolutely correct about the 401k restrictions while you are still employed at the same employer. Here is one of my very first posts on what to do with 401k when you change jobs.

      Now, coming to the point of how I was able to rollover 401k ‘4 times a year’: Several 401k plans (not all) allow pre-tax as well as post-tax contributions.

      Post-tax contributions can be rolled even while you are employed.

      Thank you for the kinds words. I am glad that you are able to benefit from my posts… stay tuned.

  4. So this is considered in some circles to be “the mega backdoor Roth IRA,” right?

    Which 401(k) providers are you aware of that allow for after-tax contributions and in-service distributions? I’m under the impression that this is somewhat of a rarity amongst providers. I think Vanguard might.

    • Yes, this is what some people call “the mega backdoor Roth IRA”.

      It is not the 401(k) provider per say that allow for after-tax contributions and in-service distributions. It is the 401(k) plan. So any provider has the capability to setup the plan so that it allows these features BUT the way in which the plan is actually set up depends on the employer.

      So each 401(k) plan is different. Employer-1 plan at a provider might allow these features while employer-2 plan at the same provider might not.

      (If after-tax contributions are permissible under the plan, then automatically in-service distributions of these contributions become possible).

  5. Thanks, another question for you – what do you about the pre-tax money in your 401(k) when rolling? From

    “Can I roll over just the after-tax amounts in my retirement plan to a Roth IRA and leave the remainder in the plan? No, you can’t take a distribution of only the after-tax amounts and leave the rest in the plan. Any partial distribution from the plan must include some of the pretax amounts. Notice 2014-54 doesn’t change the requirement that each plan distribution must include a proportional share of the pretax and after-tax amounts in the account. To roll over all of your after-tax contributions to a Roth IRA, you could take a full distribution (all pretax and after-tax amounts), and directly roll over: pretax amounts to a traditional IRA or another eligible retirement plan, and after-tax amounts to a Roth IRA.”

    • GREAT question.

      And the answer is: The information quoted by IRS is indeed confusing.

      If you read the question you quote again, you will realize that it is not talking about pre-tax and post-tax contributions. It is talking about pre-tax and post-tax amounts.

      So if you contributed post-tax and that money has some earnings, now the contribution is post-tax but the earning is pre-tax.

      What that specific question / answer says is you cannot just choose to rollover this post-tax contribution and not rollover the pre-tax earning.

      Read the next question (on the same IRS link that you shared) and things will be more clear.

      “Can I roll over my after-tax contributions to a Roth IRA and the earnings on my after-tax contributions to a traditional IRA?
      Yes. Earnings associated with after-tax contributions are pretax amounts in your account. Thus, after-tax contributions can be rolled over to a Roth IRA without also including earnings. Under Notice 2014-54, you may roll over pretax amounts in a distribution to a traditional IRA and, in that case, the amounts will not be included in income until distributed from the IRA.”

  6. Ah, I see – thanks, that’s much more clear. So in a given year, suppose one contributes the max 18k pre-tax and 35k after-tax, reaching the 53k limit. Suppose that 35k grows to 38k (and the 18k grows to 20k). One can now take an in-house distribution specifically on that 38k to convert into a Roth IRA, paying tax on the 3k of growth? And the other 20k can just sit there, to be taxed at retirement? This distinction is made clear to the IRS?

    I guess my thoughts here are – what’s the optimal order of operation if one doesn’t have the full 53k to invest? Depending how much one loves the Roth IRA, it could actually be advantageous to contribute after-tax money with the intent to roll before contributing pre-tax money (if this is allowed, I don’t know). This would challenge the traditionalist’s retirement investing model.

    Then… I start thinking that one might be able to achieve better expected returns in a brokerage account by implementing a bit that formerly discussed 15-20% leverage, and that’s where things start to get really crazy…

    • The IRS link you shared is very confusing, but the distinction is very clear (between 18k, 35k, and 3k in your example.

      Please see below my 1099-R tax form from 2012:

      As you will see the total rollover amount was $4,408 but the taxable amount was only $33 ($35/k/ $3k in your example).

      Now coming to the second point in your comment – about optimal order of operation if one does not have the full 53k. If you take a step back, then the pre-tax or post-tax contributions become very similar to IRA v/s Roth IRA decision.

      Post-tax contributions are effectively getting contributed to a Roth IRA (earnings will not be taxed at withdrawal) BUT advantage with pre-tax contributions is the tax break on the contribution today.

      If one is not in a ‘high’ tax bracket today and has a lot of years remaining (so that earnings are really high at withdrawal), then Roth option might indeed be better.

      Now the last point, 15-20% leverage (margin/ credit) is only after you have maxed out your ‘tax advantaged’ accounts.

      Although you can get lucky by ‘leverage’ model in stead of first maxing out your retirement accounts, that is not advisable.

  7. This might be a noon question to ask but could you please elaborate on this a little? What is the advantage of investing in post tax 401k vs brokerage account?

  8. Bobby ji,

    I wish I had got to know about you at least 2 months back, if not earlier. Better late than never. I am in the late 30s now.

    I have unearthed a treasure of information here that has shown me all the wrong decisions I have taken (and still taking those) regarding my finances. I am totally glued to your blog since the past week that I came across it. I like the simplicity of language that you use to explain the financial terms – which are not so easy to understand.

    I am glad that I started off with my 401k contributions (Pre-Tax) in 2012. Frankly, did not really knew what it meant then, just that it had free matching from the employer and some savings aside for retirement. After reading your blog posts, I have understood the different retirement account types and have already started asking my 401k Plan Provider the right questions now.

    I have been contributing 10% to my 401k, all Pre-Tax. My employer matches 100% to the first 3% of pay and then 50% upto 5%. That is like 4% free money from the employer. Now, I understand that my plan provides 401k Roth Electives as well and I have NOT been contributing to it, at all. I will be adjusting my contributions accordingly and will front load it to the earliest as possible.

    I have always lived below what I can afford and still wonder why I am still poor. Primarily, because I have never believed in borrowing any debts. We have been raised saying that debts are bad and avoid it by all means. I have seen people living off debts and still enjoying materialistic pleasures that the world has to offer. I, somehow, cannot convince myself to borrow for something that I can comfortably afford to pay over a period of time. Your blog post Ultra-Rich vs Rich vs Poor is breaking that belief slowly 🙂 Eventually, will come out of my current mindset.

    Also, do you intend to write on double-taxation or investment ideas for people on non-immigrant visas (resident aliens) here?


    • Dear Vinay,

      Thank you for all the kind words.

      When you front load your 401k contributions – make sure that your employer match is not lost. Some employer match per pay period ONLY if you contribute in that pay period. Apart from that, front load as quickly as possible.

      You did not mention anything about IRA but that is another thing for you to consider, there are already a few posts regarding IRAs here.

      About debts – you already see my point that living within your means and borrowing can co-exist.

      Do you have any specific questions that I can answer about resident aliens?

      • Bobby ji,

        Thank you for replying. Your reply has been quicker than my 401k plan provider’s response to my queries 🙂

        On 401k, you are right that the employer match is only applicable per pay period. I intend to put 5% to my 401k for the whole year so that I can have the full employer match. I would be front loading as quickly as possible the rest ~12k to the Roth 401k (limit being 18k between the 2).

        I do not have any IRAs. Frankly, it is only after reading your blog posts I have understood the different retirement account types and the differences between them. I am not even sure at this point if I would be contributing to IRAs bearing in mind that Investments into IRAs get locked until you are 59 1/2 years and I do not want to put all my eggs in one basket. I may not contribute to the max limit to IRAs but would do some, if I have room to do so. Or, instead of front loading my Roth 401k, should I be redirecting some to IRA? I understand there are fees associated with IRAs. I do invest into something like IRA back in my home country. That gives tax free 8% interest (inflation is high there compared to here) though there is a cap on the amount you can put in every year. The interest rate also changes every quarter.

        On the specific question for resident alien, do you think it is wise to buy a house instead of renting? I have already gone through your blog post on Rent vs Buy & 30 year vs 15 year loan. I think the question is more on liquidity of an asset like house, if an untoward or emergency departure from the country needs to be made.

        I intend to buy a cheap rental property elsewhere compared to where I am renting now (expensive here). Get a mortgage on the rental property and the rent would cover up the monthly cost for the house (mortgage, hoa, prop mgmt fees, etc.) and a little buffer that could cover some part of my rent and can be put up for repairs later on. Yeah, sounds good because it is still on mind and not in reality 🙂

        All ears to listen to what you have to say.


        • There are no fees associated with the IRAs.

          True that the funds get locked in till 59 1/2 but the same is true for 401k.

          You know your situation the best but if I were to guess, I think you would be just fine locking in all of this 401k and IRA till 59 1/2. Think of it this way – you will need money when you retire, right? What immediate expense will come up now (say in your 40s and 50s) that will make you dip into your retirement savings?

          This might not be true for everybody but you seem to be in a good job, thinking about rental properties, holding some investments in your home country etc.

          For your specific situation, buying might not be a great idea – it looks like you would rather have the flexibility than save a few hundred dollars a month (if at all) by owning.

          Rental property will be a lot of work…. please read my post about stock market versus real estate.

          Best wishes

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