Roth contributions are withdrawable without penalty. Also most employers offer a match of some amount, which is essentially free money.
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I understand contributing at least the amount an employer will match, and almost always much more than that. But to "max" it would be $24,500/yr which for many if feasible at all would leave little go into different investment vehicles meaning all of your money is tied behind the rules of a 401k until you can access it, or take that 10% penalty.
Maybe I'm missing something here but diversification is a pretty fundamental investment rule and I'm not sure why the advice doesn't usually follow it here. Putting everything into a "you can't touch this until you're ~55+" bucket seems like quite a risk.
Most people here are probably paid too much to contribute to a Roth IRA.
That's what the https://www.investopedia.com/terms/b/backdoor-roth-ira.asp is for, assuming you don't have any existing traditional IRA balances
You can also roll your traditional IRA into an employers 401k (if the plan allows this) to zero out your traditional IRA balance.
But you can do a backdoor Roth IRA by maxing out your 401k and then rolling it over into a Roth IRA with recharachterization. You lose the tax benefits of the 401k but gain the tax benefits of the Roth IRA which can be a good trade depending on your tax situation.
No, this isn't how a backdoor Roth IRA works.
Backdoor Roth IRAs involve making a traditional IRA contribution and not taking the deduction at tax filing time (because you can't), but then rolling over (not recharacterizing, that's something else) the traditional IRA contribution into a Roth IRA. It's completely tax free, assuming you have a $0 traditional IRA balance once the rollover is complete. The usual way to accomplish this is to roll all traditional deductible IRA balances into a traditional 401k first.
What you're kind of thinking of, but also not quite right, is called a 'mega backdoor Roth', which involves contributing to a 401k via a non-deductible contribution (which is not part of 24.5k/yr limit), then immediately rolling it over into a Roth 401k. It has to be allowed by the plan, but some plans even offer to do the rollovers for you automatically.
The Mega Backdoor basically lets you get an extra ~40k/yr of Roth contributions, if you can afford it.
You can convert your 401k to an IRA when you leave an employer. Some employers also offer in service rollovers (I think these mostly have minimum age restrictions on them though)
That’s a traditional IRA, not Roth.
Right but once your traditional IRA is fully rolled over to a 401k, you can take full advantage of backdoor Roth IRA contributions regardless of income.
Traditional 401k balances transfer to traditional IRAs, and Roth 401k balances transfer to Roth IRAs.
I have considerable Roth assets because my employer's 401k allows for the Mega-backdoor, which means I can put $30k+ per year of after-tax income into 401k (beyond the normal pre-tax contributions) perform a Roth-in-plan-conversion on the after-tax assets, and then roll it out into a Roth IRA.
You can’t personally contribute to a 401k beyond the limit, even after tax. Your employer can add extra via match or profit sharing contributions. What are you talking about?
For 2026, the 401k limits are $72,000 overall, and $24,500 for pre-tax employee contributions.
Assume an employer who matches 50% up to pre-tax employee contribution max, the result is this:
$24,500 pre-tax employee contribution $12,250 employer match
This leaves $35,250 to the $72k limit.
Roth MegaBackdoor enabled plans allow the employee to put $35,250 of _after tax_ contributions in to fill that window, and to convert them to Roth assets. They can even be rolled out into a Roth IRA while the 401k is still active.
I have no clue why you think this relatively common plan option is, somehow, impossible.
Not Roth 401ks, only IRAs
Yes, although some plans let you roll contributions into an IRA.
The five-year clock is for the original contribution. It’s important not to get that mixed up.
There is no five year clock for withdrawing your own Roth contributions. Contributions (not earnings or conversions) can be withdrawn at any time with no tax or penalty.