The Mega Roth – $73,500/Year Into a Roth IRA
A mega backdoor Roth is a little-known strategy allowing you to save $73,500 ($66,000 if under 50) into a Roth IRA annually. The mega Roth is primarily used by people with high incomes who cannot contribute to a Roth IRA due to income limitations.
Roth IRA Phaseout Income Limits
Single = $138,000 – $153,000
Married = $218,000 – $228,000
The $73,500 Formula
Formula = 401(k) + Employer Matching/Profit-Sharing + After-Tax Contribution + Roth Conversion
An individual can contribute up to $22,500/year (under 50 years old) or $30,000/year (50+ years old) to a Traditional 401(K) or Roth 401(k).
You can fund the remaining balance of ($73,500 – $30,000) $43,500 through any of the following ways:
- Employer can contribute via matching or profit sharing
- Employee can contribute with after-tax dollars
Backdoor Roth Conversion
You can then convert the traditional and after-tax dollars (past or present) to a Roth IRA. To better understand how a backdoor Roth strategy works, please check out our latest article on Backdoor Roth Contributions here: Unlock the Secret to Tax-Free Retirement Savings with Backdoor Roth Contributions
There are a few requirements for a successful Mega Roth:
- Employer plan must offer after-tax contributions
- Allow in-service withdrawals (not a deal breaker)
After-Tax Contribution with In-Service Withdrawal
You will want to make an after-tax contribution, then immediately take an in-service withdrawal before the after-tax contribution generates returns. It isn’t a deal breaker if your plan doesn’t offer in-service withdrawals. Once you leave your employer, you can conduct the mega backdoor Roth. However, you may owe taxes on the investment earnings once rolled over.
Reach Out to Us!
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