mega roth IRA

[jp1]

http://frominsidethebox.com/view?key=5671321778257920

So, I just posted a link to an article about the guy living in a truck in google's parking lot to ULA's thread about his new apartment and decided to take a look at the blog of the guy. The most recent post is this one, which has to do with how to super-ROTH yourself. The basic concept is that you can divert up to $53,000 into tax advantaged accounts each year. To do this he maxes out his 401k at $18,000, gets an employer match of $9,000, and puts $5,500 into his Roth. That doesn't add up to $53,000, so for the remainder of the $53,000 he puts extra into his 401k and then immediately has it diverted to a Roth IRA. The current tax benefit is zero since it was a post tax contribution, but now, instead of having to pay taxes on the distribution when he takes it out of the Roth, it's tax free because it's a Roth.

I've never heard of this before. Has anyone else? The one downside is that he can't take the income of it out until 59 1/2, only the original contribution.

[ToomuchStuff]

Never heard of it. Downside from the aritcle is not all places offer it, and some have other restrictions (amount of rollovers, etc.), so they have less paperwork to do for something they are not getting paid for.

[Rogar]

I tried to read through the article, but it's early here and the article is not clearly written. I think what he is getting at is that he can put he maximum amount plus his employer match into his 401K and it is tax exempt. He pays tax on the remainder, but has finagled a way to get it into a roth. A roth is tax advantaged because you don't pay taxes on interest or capital gains, and because you've paid taxes up front it is tax free when you withdraw. My rough understanding, but might not get it? It actually seems like an excellent plan. I see a glitch, where his tax rate as an wage earner is probably higher now than when he might do his withdrawals.

[LDAHL]

Is that what they refer to as a back door Roth?

[ApatheticNoMore]

The part noone understands is how he managed to get it into a Roth beyond the yearly IRA maximum. I'd like to be able to put more into a Roth (or even a regular IRA) than the yearly maximum, but not because I max out the 401k (and employer matching on that is pretty much non-existent - they contribute a total of $500 a year no matter how much you put in), but because I'd rather invest in something tax advantaged that wasn't a poor performing high fee 401k (I mean they really are horrible investments in many cases, their only advantage is taxes), but it's a question of hiring some fancy accountant to figure it out probably. Afterall IRS audits are no fun.

[jp1]

I talked (well, texted) with my sister last night about this. Apparently in order to do a backdoor roth IRA your employer's 401k plan has to have 2 components that not all plans do. First, you have to be able to do post-tax contributions. Second you have to be able to do current employee rollovers. I've just spent the last 15 minutes looking through my employer's benefits web site and I can definitely do #1, but I can't find anything indicating that I can do #2. I may have to call vangaard, our 401k company, to find the answer to that.

[ctg492]

Side post< How can he live in his van without the local police stopping by? I skimmed the posts and must have missed this part. Also ventilation since I assume he does not leave the door open for safety reasons while sleeping.

[jp1]

Side post< How can he live in his van without the local police stopping by? I skimmed the posts and must have missed this part. Also ventilation since I assume he does not leave the door open for safety reasons while sleeping.

He mentions in an early post that he sleeps with the door cracked a little, both for ventilation and so that no one will come along and lock him in... As far as security bothering him he posted on this a couple of times:

Have you ever been caught?/Where do you keep the truck?/What happens when you get caught?

In the week and a half that I've been doing this so far, I haven't had anyone approach the truck while I was in it or question me or anything like that. I keep it parked at the edge of an open-air parking lot on my employer's campus. If security were to come by, I doubt it would be a big issue. I've registered the car with the company vehicle database, so they know it belongs to an employee, and I've read stories about people at very similar companies having short conversations with security, and then never being bothered again. I'm not very worried about it right now, but if security does come knocking, I'll let them know that I work there. Worst case scenario, they aren't happy and they ask me to leave, at which point I get a membership at the RV parking lot down the street.

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Is what you're doing illegal?

There's two underlying questions here. First, is being homeless illegal, and second, are you homeless if you live in a car. To briefly answer the second one: living in a car is definitely considered being homeless, but I'll address that in one of the later questions. As for the legality of being homeless, I had trouble finding relevant city ordinances for where I frequently park, but nearby cities like Palo Alto and Manteca have cracked down in recent years. Additionally, there's an excellent paper that details all of the laws that California cities have regarding homelessness, in addition to providing a bunch of other useful information. Nearby places like San Francisco, Oakland, Sunnyvale, and San Jose all have anti-homeless laws, but there is no statewide ban on homelessness. I might just be missing the ordinances in my specific city, but from what I've read, it might not actually be illegal. Naturally, these laws only apply to public property. Since I'm in a parking lot owned by my company, it's well within their power to "evict" me, if they so chose.