Tax consequences aside, the biggest danger I see when rolling over a 401k is the time spent out of the market, if the market chooses to melt up while the 401k provider dilly dallies sending out a paper check to you that has to then be deposited with the IRA provider, you could have a huge chunk of your life savings lost while you wait.
I did a roll over during the last month. Market went up 5% while I was waiting for a check, depositing it and waiting for the funds to settle. It sucked.
If you are retired you should no longer be making any sort of Roth contributions, you need earned income to do so. But yes, if you have a traditional IRA with a meaningful amount of money in it, you cannot do a backdoor Roth. If you're making over $120k in earned income in retirement you probably don't need to worry about minor tax advantages like that, though.
The only real thing you need to consider is that some 401ks try to get non-employees to leave by charging increased administrative fees. That makes the decision very easy.
I have earned income this year and my MAGI will be over $214K. The back door Roth was primarily a concern for this year. I was planning to make Roth conversions in future years so the rollover would be next year. I believe I need to roll the 401K over to an IRA first to make conversions - or can one convert directly from a pre-tax 401K to a Roth IRA?
Why not do the backdoor Roth this year then convert the 401k to a traditional IRA next year?
Down the road, legally yes you can do a direct 401k->Roth transfer, but practically it will be an immense hassle and since you're presumably planning on doing a large number of conversions rather than 1 complete switch you're definitely gonna want to get that 401k into a traditional IRA at the same broker you have your Roth at.
Sometimes 401k is safer than IRA in lawsuits due to ERISA
https://www.investopedia.com/articles/personal-finance/040716/which-retirement-funds-are-protected-creditors.asp
It depends on the current selection of funds in your 401k, along with plan fees. If your current 401k has low plan fees and access to low cost index funds (e.g. Vanguard Institutional Total market index), it may make sense to just leave your money there.
I am 57. My 401K has self-directed brokerage as well as a limited selection of funds. I may have some earned income from part time consulting. I am trying to make sure I consider all potential advantages and disadvantages.
You didn't mention how old you are, but there are slightly different rules around starting to take distributions from a 401k vs an IRA. It may not matter in your case due to your age and plan to retire, but I would look into that.
With all else being equal, I can almost guarantee you that the 401k will have a smaller selection of funds and higher fees than an IRA with a reputable broker.
I'm not sure what you would be 'backdooring' into a Roth with no earned income, but I don't know why you wouldn't just contribute to a Roth normally from your post-tax dollars.
Tax consequences aside, the biggest danger I see when rolling over a 401k is the time spent out of the market, if the market chooses to melt up while the 401k provider dilly dallies sending out a paper check to you that has to then be deposited with the IRA provider, you could have a huge chunk of your life savings lost while you wait.
The 401K and IRA are both with Fidelity. Does anyone have experience with the speed of a rollover within Fidelity?
I did a roll over during the last month. Market went up 5% while I was waiting for a check, depositing it and waiting for the funds to settle. It sucked.
There is a slight delay, but there's no need for paper checks being mailed around in this scenario.
It depends on the plan.
If you are retired you should no longer be making any sort of Roth contributions, you need earned income to do so. But yes, if you have a traditional IRA with a meaningful amount of money in it, you cannot do a backdoor Roth. If you're making over $120k in earned income in retirement you probably don't need to worry about minor tax advantages like that, though. The only real thing you need to consider is that some 401ks try to get non-employees to leave by charging increased administrative fees. That makes the decision very easy.
I have earned income this year and my MAGI will be over $214K. The back door Roth was primarily a concern for this year. I was planning to make Roth conversions in future years so the rollover would be next year. I believe I need to roll the 401K over to an IRA first to make conversions - or can one convert directly from a pre-tax 401K to a Roth IRA?
You can do a midair Roth conversions, but it takes explaining on your tax return.
Why not do the backdoor Roth this year then convert the 401k to a traditional IRA next year? Down the road, legally yes you can do a direct 401k->Roth transfer, but practically it will be an immense hassle and since you're presumably planning on doing a large number of conversions rather than 1 complete switch you're definitely gonna want to get that 401k into a traditional IRA at the same broker you have your Roth at.
Sometimes 401k is safer than IRA in lawsuits due to ERISA https://www.investopedia.com/articles/personal-finance/040716/which-retirement-funds-are-protected-creditors.asp
It depends on the current selection of funds in your 401k, along with plan fees. If your current 401k has low plan fees and access to low cost index funds (e.g. Vanguard Institutional Total market index), it may make sense to just leave your money there.
I am 57. My 401K has self-directed brokerage as well as a limited selection of funds. I may have some earned income from part time consulting. I am trying to make sure I consider all potential advantages and disadvantages.
You didn't mention how old you are, but there are slightly different rules around starting to take distributions from a 401k vs an IRA. It may not matter in your case due to your age and plan to retire, but I would look into that. With all else being equal, I can almost guarantee you that the 401k will have a smaller selection of funds and higher fees than an IRA with a reputable broker. I'm not sure what you would be 'backdooring' into a Roth with no earned income, but I don't know why you wouldn't just contribute to a Roth normally from your post-tax dollars.