Are you confused about the difference between a “Backdoor Roth” and “Mega Backdoor Roth”? Not surprising! These two similar terms mean refer to very different techniques. I’ve already created more detailed videos about each, but this is a dedicated COMPARISON video which clearly explains the differences in a side-by-side description of both the backdoor Roth and Mega Backdoor Roth contributions.
Backdoor Roth: A technique to bypass the income limit for contributing up to $6000 to an IRA each year. Detailed explanation:
Mega Backdoor Roth: A technique for contributing even more than the standard $19,500 contribution limit on employee deferrals to 401(k) plans. Detailed Explanation: …(read more)
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Nice Minibar 🙂
This is the clearest breakdown I’ve seen yet. Thank you
Once I contribute the limit to the Traditional IRA, am I able to adjust my taxable income even if I convert to a ROTH?
Awesome video!
Thanks for the video. What do you do when your employer doesn't allow you to contribute to after tax non Roth ? Any ideas?
Stumbled upon your videos and I’m very impressed. I’ve already done backdoor – you’ve given me confidence to look into mega backdoor. Thank you!
Question, trying to roll over my after tax contributions to Roth IRA but I will be suspended for 3 months from making contributions following the rollover bc it’s employer sponsored, does it make sense to do the rollover in beginning or end of the year? What do ppl think?
Outstanding!
Can you help explain what will happen to backdoor/mega backdoor options based on the new tax reforms that are currently proposed? If I am a single taxpayer making less than $400k, am I unaffected?
Good video, but, you don’t have to fill the 401k pre tax or 401k Roth before you contribute 401k after tax. I contribute AT 401k and roll it over as soon as it hits because I like to invest in more than what my employer allows. The downside is that I loose the asset protection offered by 401k. Roth IRA has some but not as good. Also, if I need the money I can withdraw the now Roth IRA money
@Will Peterson if you could give some input (not financial advice! Lol). I am leaving my job 7/30, I have maxed out my 401k for 2020 and I am $1000 away from maxing out for 2021. I have traditional 401k and Roth 401k options at work, and I am wondering if there’d be any benefit to contributing my last $1000 to the Roth 401k instead to make a mega back door Roth any easier? I was planning on rolling over from traditional 401k at John Hancock to traditional IRA at Vanguard (where my Roth IRA is as well). Any thoughts on that? Brb, gonna check out more videos!
WILL, i did the vanguard nondeductible ira to backdoor roth ira- got 1099-r showing dist code 7 as fully taxable- what do i do for that?
Hi Will! How did I not know about your channel until now? Great content my friend!
@Will Peterson
Since my husband has a large sum in his rollover ira account and 40k accounts, is doing backdoor roth ira conversion will cause him to pay a lot of tax ?
For my self (non-working spouse) , i don't have any traditional/pre-tax ira in my name but already have a roth ira that is opened 10 years ago. Could we do a backdoor roth ira conversion for myself only ? If i do so, our tax won't be affected by my husband existing rollover ira account/401k account?
Thanks
My head is spinning.
I just found your channel today and can't believe you don't have more subscribers for the value you are creating. I just subscribed and know you will grow. Good luck glad I found you early
My 401K does support contributions to after-tax (non-Roth) 401K however they do not support in-plan distribution or conversion of that after-tax balance to a Roth 401K or Roth IRA. Alternatively they do support in-plan distribution of the after-tax balance to a rollover IRA and so can that rollover IRA be subsequently converted to a Roth to achieve the same end result of the mega backdoor Roth?
Does anyone know if Vanguard offers an after-tax (non-roth)? My employer uses Vanguard, and I'm not seeing anything like that.
Great video! I’m early on the FIRE path and I’m about to start a very well-paying job with an employer that uses Fidelity, so I hope that after-tax (non Roth) in-service rollovers/distributions to a Roth 401k (or external Roth IRA) are allowed by their plan.
But now that I know (and fully understand, thanks to your videos!) the power of this tool, I find myself wondering… why would anyone (1) trying to FIRE and (2) with access to an employer plan that allows this ever use a taxable a brokerage account?! The answer my head keeps going to is some vague notion of flexibility, but I have a hard time seeing how seeing how flexibility outweighs the tax advantages here for savings earmarked for retirement (as opposed to saving for a nearer term goal like kids’ education or a house).
Like… I’ve been consuming FIRE content for almost five years now and I have never seen the above point addressed anywhere, or so much as even hinted at! It seems like the mega back door Roth—not just the existence of the procedure, but its superiority in terms of “order of operations” over regular brokerage accounts—is being slept on! What do you think?
Does this strategy have a income limit threshold? If your adjusted gross income is over ~150k then you can’t contribute to a Roth, does this apply here?