Implementing A $66,000 Mega Backdoor Roth IRA (with your 401k)

(don’t forget to checkout the video too)

Mega Backdoor Roth’s are complex, but they are another great way to help create a tax-free retirement for yourself. 😎

Here are the 4 Steps to Implementing a Mega Backdoor Roth:

✅ Step 1: Max out your other tax-advantaged retirement accounts first.

Take full advantage of other tax-advantaged accounts first, including: your 401k, your traditional IRA, your HSA, and even a regular backdoor Roth IRA before even thinking about the mega backdoor roth.

These are all simpler, with tax-advantages, so take care of these first. 👏

✅ Step 2: Find out if your employer allows it.

What you’re looking for is the ability to make a NON-ROTH, after-tax contribution to your 401k (if this isn’t allowed in your group retirement plan, then unfortunately, you won’t be able to utilize this strategy). 😞

✅ Step 3: Make your Non-Roth, after-tax contribution

How to do this varies greatly between 401k plans, you’ll have to ask your plan administrator how YOU can do (or consult with summary plan description).

✨ FYI $66,000 is the max total contribution to 401k’s including you and your employers contributions ($73,500 if you’re 50+)✨

So, for example, if you contributed $20,000 to your 401k with a $10,000 employer match, you could potentially make a $36,000 non-Roth, after-tax contribution that year. 😏

✅ Step 4: Roll immediately to a Roth IRA (if your plan allows)

🌟 Ideally your 401k will account account for your non-Roth contributions AND allow for in-service withdrawals (then you can do this immediately) 🌟

If it doesn’t allow for in-service withdrawals, you’ll unfortunately have to wait until you leave your current employer.

The earnings WILL BE TAXABLE, so if you can’t do the immediate rollover you may have a significant bill to pay when you do roll it over…

It still likely makes sense over saving money in TAXABLE investment accounts…

But, without immediate rollover opportunity, you should definitely be sure to maximize ALL OTHER tax-advantaged accounts first!

But, this is still another great way to position your money into a tax-free environment for future retirement income (especially if you make too much money for a Roth IRA).

Let’s Chat 💬😎