@IxnayBob, thanks for the input. I had never heard of backdoor IRAs. Three questions:
Is there an income limit beyond which you can’t do it?
I save quite a bit in a Defined Benefit Plan each year (lots more than $53K).
The link you gave says you can save $5500 per year. How do you get $53K? I assume that is the mega part. (I have a 401K and could set up a Simple IRA if that were better).
I have to look at how well our 401(k) money is doing. Then next time we look at everything I can say how well our financial planner is doing on our financial goals in comparison to what is under our limited control in the 401(k)- we are limited in our options with the employer sponsored 401(k). I have confidence. If we are not earning the returns with safety as planned, then we have to see what other options are there.
Feb 2015 Kiplinger’s Personal Finance has a 3 page article ‘How to Invest After You Retire’. It gives a fund mix for each stage of retirement; it assumes that you will spend 3 to 4% of your assets yearly.
Note that the rule officially goes into effect 2015.
The $5500 (now $6000) limit is for a non-deductible IRA to Roth IRA conversion, a “traditional” backdoor Roth.
ETA: see https://www.bogleheads.org/forum/viewtopic.php?f=2&t=147196
@IxnayBob, that is very helpful. I’m going to go over this with my advisor and accountant.
Here is a link on Defined Benefit Plans: http://www.forbes.com/sites/ashleaebeling/2013/02/13/how-entrepreneurs-can-get-big-tax-breaks-for-retirement-savings/. It is possible to contribute $200K per year and more, depending upon your situation. There is some maximum Lump Sum distribution from the plan and excess contributions above that lead to a 50% tax of some kind (it is really arcane stuff). When I hit that number, which changes depending upon the interest rate, which I am likely to do in 3 years, I think I have to roll that over into a regular IRA and then start up a new DB plan.
The simplicity of just putting new investments into balanced funds has become appealing now that low cost funds are available. Betterment (https://www.betterment.com/story/) has done very well, though I’m still a bit leery of their formula driven model. They are tweaking the offerings lately, adding in some tax saving algorithms. If the company matures successfully through the next 5 to 10 years I might consider them for management of retirement funds.
Did the limit go up this year?
@iglooo, that should teach me to post after midnight. No increase, it’s still $5500 and $6500 for those over 50.
I am relieved! I had just finished the circus of contributing $6,500 and backdooring.
It is a bit of a circus, or as my Dad would say: “a strange way to make egg salad!”
Circuitous route aside, the mechanics are pretty simple.
^^ The employer contribution can get it to the $53K level.
http://www.irs.gov/Retirement-Plans/401k-Plans-Deferrals-and-matching-when-compensation-exceeds-the-annual-limit
@Dadof3, the employer or the employee can get it to that level. The total of employee before- and after-tax and employer contributions can reach the $53/$59 level. As it happens, the employer contribution in DW’s case is rather small 
so it mostly comes out of DW’s wallet.
I agree, just two clicks to transfer funds. It’s the conceptual circus. Moronic. they should either close the loop hole or get rid of limits.
@Iglooo, I agree. Vanguard says that the number of people doing it is increasing, but 20,000 is a low number considering their massive customer base. Even the slang name for it sounds vaguely shady. Probably millions of eligible taxpayers don’t do it because they’ve never heard of it, or it sounds dirty/shady, or their accountant is unclear about how it works.
This issue is about to get a lot more publicity. I see Obama’s proposals just coming out this weekend as an attempt to limit super-sized IRAs. Maybe I misunderstand, but the new proposals would limit IRAs to a total accumulated value of $3.4 million. It seems they are targeting the Roth, not the traditional IRA or 401K.
9,000 people have reported IRAs worth $5M or more. I am keeping this non-political, and I am not saying that Democrats don’t do this, but Mitt Romney’s IRA is reported (by him) to be worth between $20M and $102M.
Romney’s is known to the public. I wouldn’t at all be surprised there are more big roth accounts. Some may be even greater than Romney’s. We just don’t know.
“This issue is about to get a lot more publicity. I see Obama’s proposals just coming out this weekend as an attempt to limit super-sized IRAs. Maybe I misunderstand, but the new proposals would limit IRAs to a total accumulated value of $3.4 million. It seems they are targeting the Roth, not the traditional IRA or 401K”
I have no problem with them limiting the amount you can contribute for the tax deferred benefit, or even in the Roth, but I don’t know how they limit how much you can accrue. I guess they can say you have to withdraw after a certain number, which may not trigger a penalty for a Roth, but I don’t know how they can force withdrawals for taxable funds without waiving the penalty.
I’m assuming they are talking about mandatory distributions, not confiscations, but with these guys, I’m not so sure.
There’s a simple solution for this. They should just require all ira contributions be made in cash. No exceptions. They allow some exceptions and now want to add another law to cap when they could have just tighten the existing law. They are so thick between the ears that listening to them feels like walking through the mud.
Make everything owned inside a tax-advantaged account something that can be purchased (at the same price) by anyone: stocks, bonds, publicly-available mutual funds. No art, no land, no private equity, etc.
What can you contribute to an IRA that isn’t cash?