This video explains in detail what the Mega Backdoor Roth IRA contribution is: a way to bypass the contribution limit on Roth IRAs (which is $6,000 in year 2021) and stash even more of your cash away in a tax advantaged account. It makes use of a special type of 401(k) contribution, called “after-tax” contribution (I always clarify it is “after tax, non-Roth” to distinguish it from a Roth 401(k)).
These after-tax contributions are not subject to the normal contribution limit ($19,500 in 2021). In fact, you are allowed to contribute up to $58,000 using this special type! Then to perform the mega backdoor Roth maneuver, you take an in-service distribution of your after-tax 401(k) money and convert it to a Roth IRA.
The Mega Backdoor Roth Ira is a way to bypass the CONTRIBUTION limit of a Roth IRA
The (regular) Backdoor Roth IRA is a way to bypass the INCOME limit of a Roth IRA, which I explain here. I compare the two in this video:
UPDATED 2021: Although all the information in this video is still accurate, I’ve created a new video with some more information on the Mega Backdoor Strategy! Check it out here: …(read more)
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Although all the information in this video is still accurate, I've created a NEW video which improves the mega backdoor strategy and explains how I do it a bit differently now! https://www.youtube.com/watch?v=HsZCqtRhBFQ
Hi I’m confused. My plan offers 2 deferrals. 1. Pre tax deferrals 2. Roth Deferrals. This is an employer 401k plan. The limit is $20,500 for 2022. Am I eligible to contribute this additional sum? And then roll into Roth IRA? It seems like there should be a 3rd type of deferral option in a 401k plan from the video. Thank you much!
Next video Roth IRA for children—using sch c. (Age appropriate job like racking leaves for small children)
Would this be better / high priority than investing money in a taxable brokerage account?
Once we rollover into a Roth IRA & let's say I needed the money to be taken out. Is there a minimum wait time after which I can pull out the original contributions penalty-free? (ex. 5 years in Roth conversion ladder approach) Thanks.
I feel like Anthony Jeselnik is teaching me finance.
Most clear video on this subject! Thank you.
Fab explanation. Crossing my fingers my 403(b) plan allows for it.
this was helpful. thanks <3
Doesn't the IRA contribution income limit apply in rolling over to Roth IRA or Traditional IRA?
Will great video. I have a question. My company offers a 16% match whether I contribute or not. So the companies portion is 37k or so. Can I contribute to this 401a before I contribute to my own portion (19.5/ 26k)? Basically, do the “ Mega” portion first then fall back the remainder of the year on my contribution. Basically, helping the company pay that 37k as fast as possible because the portion I pay can go into the Roth. The portion the company pays (of the 37k) can not. My goal is to put 75% of my pay check Jan/ feb and pay off that 37k as fast as possible. Hopefully, by the end of February. So do I have to put my portion first or in conjunction with the 401a portion?
Thx
I do not understand what is after tax, non roth 401k？ Isnt any contribution after tax a ROTH?
You still have to pay state and federal income tax on this money ??
When I tried doing this, Fidelity said a taxable event will occur from my 401k to a roth ira.
My company only offers a Roth 401(k), which is an after-tax employer based retirement account… when I asked my plan administrator if a non-roth 401(k) is offered. He was unfamiliar with that type of account. Would it be possible to do the MBDR conversion with an after-tax Roth 401(k) into an IRA?
Question: if I created a mega back door and want to withdraw early, what happens?
Hi Will, why I need to do the mega Roth the same year? Is that a rule or a suggestion? I had contributed after tax to my employer plan a few of years ago (2017-18) now I know I can do the In-service distribution and split the money between the Roth IRA (post tax contributions) and the traditional IRA for all my earnings. Please help
Fantastic info. Thanks.
Is the employer contribution amount listed simply assuming a certain match % or is there a limit that gets it to $6,000?
Do you need to rollover the earnings as well or can you just leave them there? That would be less complicated.
Will rolling over after tax 401k earnings to IRA cause any issues while doing yearly IRA to Roth IRA (backdoor) conversion?
Do you know if the Mega Backdoor Roth is subject to the Pro-Rata Rule as well?
How can you roll over to roth or traditional ira I thought we were limited to contributions
That’s a phenomenal explanation
@5:27 : if the AFTER tax non- ROTH account is already taxed going in (from $1300 to only $1k), then grows to $3k. Why would you get taxed AGAIN for the $2k gains? I thought it was already post tax. So you're getting taxes twice? Once for the contribution and again for the gains??
Do I need to max out my 401k contributions to be able to contribute to a after tax, non roth bucket?
If I have an IRA and if I recharacterize some of the funds into my Roth IRA, I am assuming I will be taxed at that time. If I am trying to lower how much I pay in federal income taxes at the same time, can this recharacterization increase my income level because this conversion is seen as income by the IRS?
too bad this will all change for the worse soon:/