I've got growing anxiety that I'm not doing everything I can be to maximize my retirement savings opportunities. Here's my scenario that I'd love your advice on. This board is full of wisdom and I have always enjoyed learning from the POVs here.

Liquid assets:
- Sizable amount set aside in a high yield savings account for a house down payment (I have no actual real estate to my name and this pains me more and more with each passing day)
- Separate 3 months worth of emergency savings balance
- Cushion in checking
- Small, taxable brokerage account

Illiquid/less liquid assets:
- My 401K that is maxed out yearly
- Spouse's 401K that is maxed out yearly
- Roth IRA I can no longer contribute to
- Traditional IRA from an old 401K balance that I rolled over after leaving my first job. Been contributing $6K/yr but don't want to mess with backdoor conversion because the majority of that balance is pretax and don't want to pay taxes on that now.
- Old 401K from a previous employer that I haven't rolled over. Just letting it ride.
- HSA that I don't currently max out

Questions:

- I want to start building that taxable brokerage account, but is there anything I can do to do backdoor roth contributions with my current 401K after I max out the annual pretax contribution? I feel like putting a lot of contribution into the taxable brokerage account is a dumb move, but frankly I don't know where to start on trying to backdoor Roth my current 401K. Taxable realized gains are better than watching my liquid cushion sit in a savings account.

- HSA: This is another area where I'm ignorant. I don't max this out, but feel like I should to build up a balance for when we're retired and have insanely expensive insurance premium or need to use for a medical emergency. My HSA operates like a savings account and my employer contributes to it. What's this I hear about others investing their HSAs in what I presume are low cost index funds and saving medical receipts to withdraw the money at a later time (vs today? Didn't know you could do that)

- Life insurance: term life. Do I really need supplemental coverage here? My spouse is well equipped to prosper financially if I were to pass. Perhaps this becomes an issue if we become parents.

Here's my current approach:
1. Buy real estate within next 2 years
2. Continue maximizing pretax 401Ks
2. Figure out how to backdoor Roth my current 401K after maxing. How do I go about figuring that out? What are the right questions to ask so I don't foul this up?
3. Contribute more to the taxable brokerage account
4. Contribute more to HSA/figure out how to invest this balance through my company's sponsored plan.

Spouse and I have many years of working left, God willing, so I'm willing to be more aggressive in investment approach.
No children currently, but potentially one in the next few years.

Would you change the approach above?

Thank you

OP - your post is way too generic to expect anything more than generic advice. And yes, there is a reason to second guess converting to a Roth. As OP said, there is a pre tax balance that would trigger taxes in the process. But again, very generic post so we don't know scale of magnitude for anyone to give an actual opinion.

Based on the context you provided, I cant imagine you having any issues at retirement unless there are details missing. Do the math if you haven't already. Easy to build a simple spreadsheet that forecasts your current state into retirement so you can play with the numbers.

Definitely max out the HSA for the reasons stated above.

What is your aversion to taxable brokerage? Just find some low fee index funds and auto invest.

I have found this checklist helpful in prioritizing where to put money.

https://www.personalfinanceclub.com/wp-content/uploads/2020/06/2023-01-09-Ultimate-Investing-Checklist.jpg

HSA - As mentioned, max that.

401k - If your plan allows it, you can contribute after-tax dollars and do an in-plan Roth conversion so it immediately goes into a Roth. (This avoids any tax events.)

This is known as a mega backdoor Roth. Everyone who has it available should take advantage. It basically just raises the Roth contribution limit by $46k.

I max out my 401k every year. Because I'm 51, we (plus employer matches) will put in $76,500 this year. I put some of it in the after-tax supplemental bucket and then roll that over into a Roth at the end of the year. I do incur a smallish capital gains tax typically, but that's a small price to pay. We are able to do back door Roth contributions through the after-tax contributions and we are able to contribute to our Roths by parking it into a simple IRA and then rolling it over to a Roth. This works around the fact that my income would no longer make me eligible for Roth contributions.

As others have said -mega backdoor Roth. You have to ask if your company 401k allows in-plan distributions.

If your 401k is with a big company like Fidelity, just call and say you want to do a mega backdoor Roth. Eventually, they will transfer you to someone who knows if your plan allows it and how to set it up.

I have mine with Fidelity. After a one-time set up, I can now go to my online account and change contributions. Fidelity takes care of all the tax accounting in the background. All of my contributions are invested the same as my existing 401k. I do not have the option to do anything else. Your plan may vary, but these are all questions to ask.

As others have said, you can contribute up to an additional $46k (minus employer match).

If you rolled over a previous 401k, you can't do the "traditional" backdoor Roth anymore without being taxed. I learned this the hard way last year, to the tune of $1200. Thankfully my refund covered it.

Regarding your HSA, your employer may or may not give you the ability to invest those funds. When we were employed at corporate, we both had Optum and you had to carry a minimum cash balance of $1K in the primary account but then you could automatically roll any dollars over that amount into a separate investment account where you could invest it.

I would just look at your corporate benefits information if you have an internal portal or paperwork on it. Or call your HR department.

If the money to max the HSA comes from your paycheck, then it is not taxable as income AND not taxable under Social Security or Medicare. It is a no-brainer to max it.

Not sure how much extra you have to work with, but here are some thoughts...

"Traditional IRA from an old 401K balance that I rolled over after leaving my first job. Been contributing $6K/yr but don't want to mess with backdoor conversion because the majority of that balance is pretax and don't want to pay taxes on that now."- You don't state how much you have in this account, but you could start chipping away at rolling over some amount of it every year and paying the tax hit. Also, if you are not rolling over the IRA dollars why are you prioritizing that over a brokerage account? You will be taxed at regular tax rates when you pull that money out of your traditional IRA. I would think that $6k would be a good source for your taxable brokerage which will be taxed at the more favorable capital gains rates.

"HSA that I don't currently max out" - Assuming you have the funds, this should be the first thing you change. ours has limited investment options at first but once the account reaches a certain value it opens up to more options.

"Figure out how to backdoor Roth my current 401K after maxing. How do I go about figuring that out? What are the right questions to ask so I don't foul this up?" - I don't understand your question really...Does your employer offer a ROTH 401k option? There is not backdoor to pre-tax 401k dollars. You may be confusing the mega-backdoor ROTH, which is taking AFTER-TAX contributions and rolling them to ROTH. This is done in your 401k if your plan allows. This is a great product if you have the funds and your company allows it. The 2 questions for your employer and/or fund manager is 1. do you allow after-tax contributions, and 2. do you allow in-plan rollovers. There are lots of resources on this that are a google away.

BigN--00 said:

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If the money to max the HSA comes from your paycheck, then it is not taxable as income AND not taxable under Social Security or Medicare. It is a no-brainer to max it.

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if it doesn't come from paycheck it's still deductible from income taxes

Pay off ALL your debt. Don't nitpick saying this debt has a low rate, that loan won't hurt me, this one I can make more in the market... etc. Just pay it off all the loans and just have revolving credit card debt alive which you pay off every month.

Get to that point first. Then you can maximize other things. I have done this myself. The mental freedom is unbelievable.

Monywolf said:

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HSA - Contribute the max, invest it and never touch it.

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Do most of you financial experts do this? I put as much as I can in, but I'll still spend some on Doctor visit copays and whatnot.

double aught said:

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Monywolf said:

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HSA - Contribute the max, invest it and never touch it.

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Do most of you financial experts do this? I put as much as I can in, but I'll still spend some on Doctor visit copays and whatnot.

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If you can pay out of pocket now, you can reimburse yourself at any point in the future with funds that have grown tax deferred and are will be a tax-free distribution. If you don't want to bother with receipts you will probably have health care expenses in later years that can be paid out of the HSA.

Or what Youbet just said

Appreciate all the comments here. Definitely going to max the HSA and stop all spending against it unless there's an emergency. Invested my current balance today in a target date mutual fund.

I'm going to call my 401k administrator this week to discuss contributing to a Roth 401k after maxing my pretax 401k contributions this year. I believe it's a possibility with my plan, just want to make sure they can account for it and track it so I don't have to manage it like a hawk like I'm doing with my traditional IRA that has a mix of pre and post tax contributions. I'm timing my pretax contributions in current 401K so I max out while also ensuring I get all of the employer match throughout the year.
My spouse's plan otoh wont auto-stop us from overcontributing, so just something I have to keep an eye on as we approach year end.

Going to crunch the numbers this weekend to see what % I can realistically put towards retirement this year while building the liquid taxable brokerage account. While we're DINKs, these are some of our most important years to build on the foundation for wealth in the future.

The only debt we currently have is a car note worth $6K with a 2% interest rate, no biggie there thankfully. We paid off student loans about a year ago.

Cash balance for house down payment/closing costs/furniture is roughly $180K in a HYSA. Not going to move that $ right now.

Outside of this, I figure keeping a 3 month emergency fund and a separate ~$10K checking balance is enough of a safety net at this time.

You can't contribute to Roth 401k after maxing pre tax 401k.. there is one aggregate 401k limit. The question.. can you make after tax 401k contributions and then convert those to a Roth (which ideally is able to be rolled out and converted, with taxes paid on any gains).

YouBet said:

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double aught said:

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Monywolf said:

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HSA - Contribute the max, invest it and never touch it.

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Do most of you financial experts do this? I put as much as I can in, but I'll still spend some on Doctor visit copays and whatnot.

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If you have the cash flow to cover those then there is no reason to use your HSA. Save that money.

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What's the difference between reimbursing yourself and just using the HSA debit card?

sherminator said:

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YouBet said:

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double aught said:

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Monywolf said:

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HSA - Contribute the max, invest it and never touch it.

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Do most of you financial experts do this? I put as much as I can in, but I'll still spend some on Doctor visit copays and whatnot.

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If you have the cash flow to cover those then there is no reason to use your HSA. Save that money.

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What's the difference between reimbursing yourself and just using the HSA debit card?

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This strategy is to incur costs now, scan/save all receipts, leave HSA funds to grow tax free for years/decades, use receipts anytime during lifetime to withdraw tax free against any lifetime medical/drug/pharmacy/equipment expenses. You aren't reimbursing yourself now, that would be same as using the debit card.

cjsag94 said:

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sherminator said:

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YouBet said:

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double aught said:

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Monywolf said:

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HSA - Contribute the max, invest it and never touch it.

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Do most of you financial experts do this? I put as much as I can in, but I'll still spend some on Doctor visit copays and whatnot.

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If you have the cash flow to cover those then there is no reason to use your HSA. Save that money.

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What's the difference between reimbursing yourself and just using the HSA debit card?

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This strategy is to incur costs now, scan/save all receipts, leave HSA funds to grow tax free for years/decades, use receipts anytime during lifetime to withdraw tax free against any lifetime medical/drug/pharmacy/equipment expenses. You aren't reimbursing yourself now, that would be same as using the debit card.

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Thanks for the feedback. I didn't realize you could reimburse at any time, I assumed it had to happen within the calendar year of the procedure/office visit.

That's the case for FSA accounts. FSA and HSA are different because HSAs are only available to people on high deductible plans. The idea behind them is to have enough money in savings to cover your deductible and max OOP at any given time. My employer also contributes $1000 to my HSA.

A lot of people use them to pay for "routine" medical expenses, which is certainly fine. But a lot of people are scared of HDHPs because they don't have $5k (or whatever your deductible is) to cover a medical emergency. If you have that money saved up, the HDHP is a great deal. Until a couple of years ago, my HDHP was free. Now it's around $50/month for me and my one dependent. In 10+ years, we've only ever had one medical issue that caused us to even reach the deductible (son broke his arm, so he hit his deductible; it's prorated, so I didn't hit mine). Most years the only medical expenses we have are eyeglasses and a few prescriptions.

TXTransplant said:

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That's the case for FSA accounts. FSA and HSA are different because HSAs are only available to people on high deductible plans. The idea behind them is to have enough money in savings to cover your deductible and max OOP at any given time. My employer also contributes $1000 to my HSA.

A lot of people use them to pay for "routine" medical expenses, which is certainly fine. But a lot of people are scared of HDHPs because they don't have $5k (or whatever your deductible is) to cover a medical emergency. If you have that money saved up, the HDHP is a great deal. Until a couple of years ago, my HDHP was free. Now it's around $50/month for me and my one dependent. In 10+ years, we've only ever had one medical issue that caused us to even reach the deductible (son broke his arm, so he hit his deductible; it's prorated, so I didn't hit mine). Most years the only medical expenses we have are eyeglasses and a few prescriptions.

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Insurance has gotten so confusing now it's hard to even define it. For 2024, we had the option to go with a PPO or an HSA. The HSA deductible is actually cheaper than the PPO which has never been the case for us. And the OOP max is slightly less than the PPO. And there is no issue with medical emergencies. Both plans cover that. There is a $3 difference per month between the plans. Both plans have same payment for labs and x-rays.

The only real differences between the two are that you have a copay in network on the PPO for primary and specialist visits and with the HSA you pay the deductible and then a percentage after deductible is achieved. So I guess we will pay more out of pocket on the HSA than the PPO if we have a lot of doctor's visits other than that it's mostly the same plan. The biggest differentiator is that we can obviously invest the $8,300 with the HSA whereas with the PPO I can't.

I'm the only person at our company who opted to go with HSA. I used to scour these plans much moreso then I did but at this point they are so closely alike I just go with the one that lets me invest an extra $8,300 per year.

Reading that made my head hurt…kidding/not kidding.

Your options sound a little different from mine, in that, other than very specific "preventative" doctor visits and specific prescriptions, everything is OOP until I hit my deductible.

Preventative visits are basically one "annual" exam (well woman or pediatric for us). Prescriptions are very basic (birth control and BP meds). Anything above that, I pay until we hit our deductible. Now, we get a negotiated/discounted rate on everything, so if I need to go to the endocrinologist it's only maybe $100-$150 (assuming I don't need any sort of in-office procedure).

When I used the term "medical emergency", I meant something above and beyond a doctors visit (like my son's broken arm). It's covered by my plan, but I had to pay the equivalent of his deductible as my share of the bills, plus an OOP max. So, I had to cough up something like $3 or $3.5k basically all at once. It was not a hardship, so I didn't use my HSA, but I could see where it could be for some people.

Our next plan up (which I think is a PPO) is something like $400/month for families. Maybe even more than that now. The cost of that plan increases by double digit percentages every year. IDK what it even covers anymore because it's so expensive and we almost never meet our deductible.

I have a coworker on the more expensive plan who always hits his deductible, and I think it kind of comes out as a wash when you compare my deductible to his deductible+premiums. He's out the same amount of money, most of it just comes out of his paycheck every month. He likes the "peace of mind" of knowing that the money is set aside for him and he doesn't have to "save" it. Although he could just direct the equivalent of his premiums to an HSA and accomplish the same thing. That was actually my original goal when I switched to an HSA, but the tax advantages to maxing it out were just too good for me to not contribute the max.

YouBet said:

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infinity ag said:

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Pay off ALL your debt. Don't nitpick saying this debt has a low rate, that loan won't hurt me, this one I can make more in the market... etc. Just pay it off all the loans and just have revolving credit card debt alive which you pay off every month.

Get to that point first. Then you can maximize other things. I have done this myself. The mental freedom is unbelievable.

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Agreed if it makes sense for you. We are completely debt free as of October and it feels pretty awesome.

I paid off my grad school loan debt early (about 10-12 years ago) which is highly debatable because my loan rate was only 1.25%. I obviously could have made more money with that money if I had invested it instead, but I wanted it off the books. Never regretted it other than the recent injustice of losers with loser degrees getting their loans written off by the federal government, but I digress.

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Yes, the mental peace I got from doing this in 2018 has been amazing. My kid went to college in 2022 and I did not take out any college loans.

My FA thinks everyone should have a 529 account, even if ya don't have kids

jamey said:

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My FA thinks everyone should have a 529 account, even if ya don't have kids

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Well, they just changed the rules on it and made it more flexible although I'm blanking on what that was...

You can now rollover unused funds to a Roth IRA after 15 years for the benefit of beneficiary.

My question would be, if your kid doesn't use all the funds, can you then name yourself the beneficiary and the rollover Roth IRA become your account?

txaggie_08 said:

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You can now rollover unused funds to a Roth IRA after 15 years for the benefit of beneficiary.

My question would be, if your kid doesn't use all the funds, can you then name yourself the beneficiary and the rollover Roth IRA become your account?

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Clock starts over with beneficiary change.. so answer is yes, in 15 more years.

Maximize your opportunity to buy RE NOW. When is the best time to start? NOW.

Nothing wrong w/401K maximizing(you didn't mention your age), but those funds put into RE could retire you quicker than playing the hoping game/gambling w/IRA, 401K's HSA's etc., where you put money and hope.

But that's just me.