AS FEATURED ON FORBES
Today is National 401k Day. To celebrate, I asked a selection of financial experts about their best practices on how to 'hack' a 401k.
Patrick McDowell, Investment Analyst, Arbor Wealth Management, Miramar Beach, FL
Use your 401k to enable a backdoor Roth IRA contribution transaction.
You can't make a non-deductible IRA contribution and then convert just that amount into a Roth IRA if you have other traditional IRA assets outstanding.
But, if you have a 401k that allows roll-ins, you can roll your IRA into your 401k and then execute the backdoor Roth IRA transaction.
It's a lot of work to get $5,500 or $6,500 into a Roth IRA and it somewhat limits your investment flexibility but if you have a great 401k plan it can be worthwhile.
The other hack is doing what's often called a self-directed 401k where you can invest in individual securities rather than just the standard fund options available.