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meamemg t1_j6ozzm3 wrote

You are comparing a traditional IRA/401k to a Roth IRA/401k. For high income individuals, the traditional will be better, yes.

Where the backdoor Roth comes in is once you have maxed out the traditional IRA/401k. If you have additional money that you want to contribute but exceed the limits for a traditional 401k, and make too much for a deductible traditional IRA contribution. Then you need to compare to putting it into a regular taxable investment account. And a Roth IRA will come out better than that.

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Complete-Smoke9368 OP t1_j6p2pmr wrote

Is there a reason that it only comes once you have maximized contributions? Why wouldn't you perform a mega backdoor Roth even if you were contributing say 80% of the federal limit?

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meamemg t1_j6p3m6c wrote

For the reasons you outlined: A traditional contribution is better than a Roth contribution for people with relatively high incomes.

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Complete-Smoke9368 OP t1_j6p55y0 wrote

Right, but I guess the part that confused me was the implication that because I had not hit the yearly maximum for 401k contributions I would not perform a backdoor roth conversion. Wouldn't the interest accrued in the trad 401k be growing and taxable?

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meamemg t1_j6p5orf wrote

It would. But if you are in a higher tax bracket, the tax deduction is more valuable.

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