In 2023, Chevron professionals can use the Mega Backdoor Roth strategy in the Provident Fund to save up to an additional $17,100 in an account that grows tax-free for life! Super-savers at Chevron can use the Mega Backdoor Roth strategy each year to maximize these savings using their retirement benefits.

Did you like the information presented today? Don’t wait. Watch our free on-demand webinar that shows how Chevron professionals can save over $72,500 in tax-efficient accounts in 2023 here:

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Video highlights:
03:57 Mega Backdoor Roth Strategy
06:27 Making After-Tax Contributions in the 401(K)
07:55 Why Roth IRA vs Taxable Account

What’s the Mega Backdoor Roth Strategy?

When you make after-tax contributions in your Chevron ESIP 401(K), you have two options for what you can do with those funds: leave them in the 401(K) or roll them out via a Roth conversion to a Roth IRA.

If you leave the funds in the 401(K), at withdrawal, your contributions will be tax-free. Any growth you accumulate will be taxed at ordinary income rates. That’s not too tax-efficient.

If, instead, you annually roll the after-tax funds over to a Roth IRA, the growth and contributions grow tax-free for life!

How to Max Out Your 401(k) at Chevron this Year?

If you’re under age 50, the total IRS limit for 401(k) contributions in 2023 from employee or employer contributions is $66,000. If Chevron contributes the full $26,400, employees under 50 can contribute $39,600 across the Pre-Tax, Roth, or After-Tax sources.

Learn how to Max Out Your Chevron 401(k) here:

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We offer a complimentary Chevron first meeting. Click here to schedule your free consultation:

Willis Johnson & Associates
5847 San Felipe St., #1500
Houston, TX 77057
713.439.1200
marketing@wjohnsonassociates.com

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Disclosures:
Willis Johnson & Associates is a registered investment advisor. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Corporate benefits may change at any point in time. Be sure to consult with human resources and review Summary Plan Description(s) before implementing any strategy discussed herein. Willis Johnson & Associates is not a CPA firm….(read more)

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Chevron Mega Backdoor Roth Strategy – You Could Put $17,100 into Roth Savings this Year

Saving for retirement is a crucial aspect of personal finance, and maximizing your contributions to tax-advantaged retirement accounts is a smart move. One lesser-known strategy that can help individuals save even more is called the Chevron Mega Backdoor Roth Strategy. By taking advantage of this strategy, you could potentially put an additional $17,100 into your Roth savings account this year, providing you with significant tax benefits in the long run.

The Chevron Mega Backdoor Roth Strategy is named after the Chevron Corporation, which was one of the first companies to offer this option to its employees. However, it is important to note that this strategy is not exclusive to Chevron employees and can be utilized by anyone who qualifies based on certain criteria.

Before diving into the details of this strategy, it is essential to understand the basics of a typical Roth account. A Roth account is a tax-advantaged retirement account that allows individuals to contribute after-tax income and enjoy tax-free growth and withdrawals (subject to certain conditions). Contributions to a Roth account are not tax-deductible, but the earnings and withdrawals in retirement are tax-free.

Now, let’s explore how the Chevron Mega Backdoor Roth Strategy works. The strategy involves taking advantage of your workplace retirement plan, such as a 401(k), 403(b), or 457 plan. Most traditional retirement plans have annual contribution limits that cap your contributions to $19,500 in 2021 (or $26,000 for individuals age 50 or older). However, the IRS allows for additional contributions beyond these limits under certain circumstances.

To utilize the Mega Backdoor Roth Strategy, your employer’s retirement plan must allow for after-tax contributions. Once you have maxed out your regular pre-tax contributions, you can contribute additional after-tax income to your retirement plan – up to the total annual defined contribution limit set by the IRS, which is $58,000 in 2021 (or $64,500 for individuals age 50 or older).

After-tax contributions made through the Chevron Mega Backdoor Roth Strategy can then be converted into a Roth account. This conversion ensures that the additional contributions enjoy the same tax-free growth and withdrawals as a traditional Roth account. By doing this, you effectively bypass the traditional income limits for Roth contributions, which are $140,000 for individuals in 2021 and $208,000 for married couples filing jointly.

The key advantage of the Chevron Mega Backdoor Roth Strategy is the potential to contribute an additional $17,100 ($58,000 – $19,500) or more to a Roth account. This is a substantial boost to your retirement savings, especially when considering the compounding growth over several years.

However, it is important to note that not all employers offer the option for after-tax contributions or in-plan Roth conversions. If your workplace retirement plan does not allow for these features, you may not be able to utilize the Chevron Mega Backdoor Roth Strategy. It is crucial to check with your employer’s HR department or plan administrator to understand the specific rules and options available to you.

Additionally, it is important to consider the tax implications of the strategy. When converting after-tax contributions to a Roth account, any earnings on those contributions will be subject to ordinary income tax rates. Therefore, if you have sizable pre-existing traditional IRA or 401(k) balances, this conversion may not be as beneficial due to the increased tax liability.

In conclusion, the Chevron Mega Backdoor Roth Strategy is a powerful way to boost your retirement savings and take advantage of additional tax benefits. By making after-tax contributions to your workplace retirement plan and converting them to a Roth account, you can potentially put an extra $17,100 or more into your Roth savings this year. However, it is crucial to consult with a financial advisor or tax professional to determine if this strategy aligns with your overall financial goals and individual circumstances.