There is a proposal going through congress that could end the Mega Backdoor Roth IRA as we know it. It’s slated to target high income earners but I think it may extend to all retirement plan savers.
There are several proposals that are limiting retirement savings and forcing certain earns to pay more in taxes on their retirement savings.
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The Mega Backdoor Roth IRA is a savings strategy that has been gaining popularity in recent years among those who are looking for tax-efficient ways to save for retirement. However, there are concerns among some experts that this strategy may come to an end.
The Mega Backdoor Roth IRA involves contributing after-tax dollars to a 401(k) plan and then rolling them over into a Roth IRA. This allows individuals to take advantage of the tax-free growth and withdrawals that come with a Roth IRA.
While this strategy can be incredibly beneficial for those who have the financial means to contribute significant amounts of after-tax dollars to their 401(k), it is not without its potential downsides. One of the biggest concerns is that the IRS could deem the strategy to be a violation of contribution limits.
Currently, the annual contribution limit for a 401(k) is $19,500 for those under the age of 50 and $26,000 for those over 50. However, the Mega Backdoor Roth IRA allows individuals to contribute after-tax dollars beyond these limits.
The concern is that the IRS could change the rules around the Mega Backdoor Roth IRA, potentially limiting or even eliminating the option altogether. Some experts believe that this could happen as part of an effort to increase tax revenue.
While it is impossible to predict with certainty what the future holds for the Mega Backdoor Roth IRA, there are steps individuals can take to protect themselves in case the strategy does come to an end.
One option is to focus on traditional Roth IRA contributions and other tax-advantaged retirement savings options. Another option is to make sure that any after-tax contributions made to a 401(k) plan are well within the normal contribution limits.
Ultimately, it is important for individuals to work with a financial planner or tax professional to develop a retirement savings strategy that takes into account their unique situation and goals. By doing so, they can make sure they are making the most of the options available to them while minimizing their tax liability.
The Roth conversion itself adds to your income for disqualifying your conversion. Nasty catch-22.
Is it really stopped. When it is getting as law. anywhere the timeline is set ?
This is ridiculous…After a lifetime of not being able to afford to contribute to a Roth, and then making "too much" to do so, I finally have access to a mega backdoor Roth at work and I won't be allowed to contribute?
Prior to this year, my Roth balance was about $4k….Now I can't contribute because Peter Thiel has $4 billion in his? Where is the logic in their proposal?
I was planning to try the backdoor Roth path in 2022…sigh. I’m not making that much yet, but I had hoped.
Our government is always trying to steal money from us versus controlling their spending. Despite this morons continue to vote Democrat. This saddens me. Great work!
Y’all really would like some mean tweets right about now I bet.
I have a living revocable trust (grantor). Should I panic about the changes to grantor trusts?
They will force everyone into traditional contribution and then kill you with tax hikes in old age.
Hi Travis! Enjoy watching all your videos – anything retirement related. Thank you for posting them. A couple years ago, I learned about the mega backdoor and discovered that my employer allowed for post tax contribution and in-service withdrawal, so I've been doing it on my own without having to pay a 3rd party. Basically after each pay period, I'd request for the rollover and the payment is sent directly to my brokerage firm. Interestingly, the rollover amount also includes a small pretax amount (mandatory) which represents the employer match, so I'd request the plan admin split the payment into two checks so I can direct the post tax into my Roth and the company match pretax into my regular IRA. I'm aggressively saving to build my Roth account so it will be a big bummer if they eliminate this ability. Maybe I'll be retired by the time they pass this new law! LoL
Hey Travis, I had trouble understanding toward the end of your video. Will the Mega backdoor Roth still be possible after December if this legislation passes how it is currently presented? I have a Solo 401k and paid 600$ to a financial group just 2 weeks ago to begin doing this process for the mega backdoor roth