Mega Backdoor Roth: Add $50K+ to Your 401k

The Mega Backdoor Roth takes investing in a traditional 401(k) to the next level for high-income earners.

It’s complicated, and mistakes can be costly. Nevertheless, it works great for some. So, it’s worth learning about it. In this article, we’ll talk about the basic rules of a Mega Backdoor Roth

What Is an Individual Retirement Account (IRA)?

An individual retirement account (IRA) is a savings and investment account with tax advantages.

A traditional IRA uses pre-taxed dollars, while a Roth IRA uses after-tax dollars. As a result, they both have tax savings, either now or later.. They incur a 10% early withdrawal penalty, but it’s waivable in certain situations.

Roth IRA Versus Traditional IRA

A Roth IRA is an individual retirement account (IRA) funded with after-tax dollars. It allows funds to grow over time without incurring taxes on the profit

Unfortunately, high-income earners can’t directly contribute to a Roth IRA.

Maximum contributions are limited to individuals who earn less than $129,000 (single) and $204,000 (married).

Backdoor Roth IRA

The backdoor Roth IRA allows high-income earners to transfer funds from a traditional IRA to a Roth IRA, and may transfer up to the maximum $6,000.

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