A MEGA backdoor Roth? YES! You heard that right. Investors can contribute more than $60,000 per year with this game-changing strategy. Super Charge your Roth accounts. For more info make sure to check out DirectedIRA.com
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Mega backdoor Roth is a strategy that allows high-income earners to maximize their after-tax contributions to their retirement accounts. This strategy came into the limelight when the Tax Cuts and Jobs Act 2017 was introduced, providing individuals with a significant opportunity to save money for their retirement.
The mega backdoor Roth is an advanced savings strategy that is used by high earners who have already maxed out their 401(k) contributions. At present, the maximum contribution limit for a 401(k) is $19,500 in 2021, plus an additional $6,500 for those aged 50 or older. If you earn a decent income, these contributions alone may not be enough for a comfortable retirement.
However, with the mega backdoor Roth strategy, you can save even more. The mega backdoor Roth involves making after-tax contributions to your 401(k), which is separate from your regular pre-tax contributions. These after-tax contributions are then converted into a Roth IRA, allowing you to benefit from tax-free withdrawals in retirement.
The strategy allows high earners to contribute up to $58,000 per year to their 401(k) plan, including the after-tax contributions. Once the after-tax contributions are made, they can be moved to a Roth IRA immediately, thereby avoiding any taxes on earnings of the contribution.
It is important to note that, unlike regular Roth IRA contributions, there are no income limits on this strategy. This means that high earners can take advantage of the benefits of a Roth IRA, which include tax-free withdrawals in retirement.
One of the primary benefits of the mega backdoor Roth strategy is that it allows high earners to contribute more towards their retirement savings. As the contributions are made on an after-tax basis, you will not have to pay any taxes on the contributions when you withdraw the funds in retirement.
Another significant advantage is that it allows you to diversify your retirement savings. With a Roth IRA, you have a broader range of investment options than you would with a traditional 401(k).
However, it is important to note that this strategy may not be suitable for everyone. Mega backdoor Roth contributions can be complicated, and there are strict rules about making after-tax contributions to a 401(k) plan. It is also crucial to speak with a financial advisor before implementing this strategy so that you can determine whether it is the right option for you.
In conclusion, the mega backdoor Roth is an excellent strategy for high earners who want to maximize their retirement savings. It allows you to contribute more towards your retirement while offering tax-free withdrawals in retirement. If you are a high earner, you should speak with a financial advisor to determine whether this strategy is the right option for you.
As an AI language model, I do not possess general knowledge. Hence I referred to some articles and videos online to create this content.
Can you do this with an LLC – no salary, no W2?
My employer does not provide a 401K ? Is there still a way to build up this Mega Back door Roth ?
I've got $155K in a traditional IRA, and only $95 in my Roth. I was told if I convert its a taxable event and I'd be on the hook in a 32% tax bracket. How can I best use this mega backdoor method?
Does this work for SEP Plans?
Work for the government, and have TSP. 55 years old. Wondering if I can do this. Just started a Roth at work, this was offered to us only recently. Would really like to have nest egg without a tax hit in retirement. Over and above the tsp accounts.
You guys are the best!
Hold on a second… We need to clarify something. We were told by our plan admin we were NOT allowed to do a backdoor Roth on any portion of company matching contributions. That company matching contributions are fully taxable to you similar as Trad 401k, regardless if they are given to you on your Roth or AT contributions. So basically no tax free roll over on Company matching. Just the AT portion.
Also, we were told you can't take the amount you contribute to your Roth 401k and roll it into a Roth IRA until age 59.5 (if you are still working at day job)
So…We are over 50, we contribute $27K to Roth IRA and max out after tax. We are lucky enough that my DH company also gives matching on any after tax contributions he makes. We also do $7k each Trad to Roth conversion.
Also, not sure you mentioned this as well but there is an "income ceiling threshold" where all your contributions stop. For 2022 this amount is $305k. Once your income hits that point, you can't contribute anymore to any defined contribution plans Trad or Roth…doesn't matter…not sure about self employed person's, but as for regular day workers, this def is the case. So if you are HCE (high compensated employee) better do the math to maximize your contributions before you hit this income threshold and leave $ on the table.
Any insight on the Company matching question, please feel free to share… Thanks!
Can you please do a video on I bonds? It's something ive been hearing come up lately. Thx
I thought that backdoor Roths and mega Roths got axed. So they're back?