Summary of “How To Build A Large Roth IRA”

How to Build a Large Roth IRA Many 401k plans allow their plan participants to make after tax contributions.
Distributions from Roth 401ks are tax free.
At the earliest opportunity, transfer these directly to a Roth IRA. Why is that helpful? If after tax contributions can be moved to a Roth IRA after a short period of time, the vast majority of the appreciation on the underlying assets will be concentrated in the tax free Roth IRA account.
Conversely, after tax funds that accumulate over many years in the traditional 401k will be taxed at high ordinary income levels when they are finally distributed.
If, instead, he rolls over the sum to a Roth IRA immediately, those funds grow tax free.
At the end of 20 years, his IRA will be worth $46,610 with NO TAX LIABILITY. The foregoing is a simplified scenario but it does illustrate the increased benefit of a rapid rollover of after tax 401k contributions to a Roth IRA account.
The value of after tax 401k contributions hinges on the immediacy with which the plan participant can move after tax contributions to a Roth IRA outside.
One key advantage to it is that qualifying 401k plan participants should will be able to move more money into their Roth IRA. It’s important to note that after tax 401k contributions are NOT substitutes for conventional 401k deferrals.

The orginal article.