How To Hack Your 401(k)

Patrick R. McDowell, CFP®, AIF® was quoted in a Forbes article by Karl Kaufman discussing how to hak your 401(k).

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.