Many companies including Microsoft, Salesforce, Amazon, Facebook, and Google, are offering an additional retirement savings option called the Mega Backdoor Roth 401(k). Learn about the Mega Backdoor Roth 401k, its tax benefits, and when you should consider saving into this type of account….(read more)

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Mega Backdoor Roth 401k is a type of retirement savings plan that allows high-income earners to contribute a significant amount of after-tax money into their company-sponsored 401k plans.

This type of plan allows individuals to exceed the annual contribution limits for traditional 401k plans which are $19,500 and $26,000 respectively for people under the age of 50 and those over 50. This means that they can make an additional after-tax contribution of up to $37,500 per year, bringing the total annual contribution limit to $57,000.

The beauty of Mega Backdoor Roth 401k is in its ability to allow for this significant level of after-tax contribution, which can be automatically converted to after-tax Roth contributions within the same plan. This conversion allows the money invested in the Roth 401k to grow tax-free, and distributions taken in retirement are also tax-free.

Another advantage of this plan is that individuals do not have to pay any income tax on the converted amount. This means that high-income earners who are facing significant tax burdens can use this plan to reduce their overall income tax liabilities.

The eligibility for this plan varies across different employers, and it is essential to check with your HR department to determine whether your employer offers this plan.

In conclusion, Mega Backdoor Roth 401k is a retirement savings plan that provides an excellent opportunity for high-income earners to maximize their contributions and reduce their tax liabilities. It is essential to understand the eligibility criteria and contribution limits to take advantage of this plan fully. Overall, it is a great way to save for retirement while minimizing your tax liabilities.