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.
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 profits.
It’s important to note that traditional IRA contributions use tax-deferred income. If you want to make after-tax contributions, look into a mega backdoor Roth IRA.
Benefits of a Mega Backdoor Roth IRA
1. It can rapidly increase overall retirement savings rates.
2. The Mega Backdoor Roth IRA allows for significant tax-deferred growth when done correctly.
Cons of the Mega Backdoor Roth IRA
1. It’s not easy to contribute beyond the tax-deferred contributions.
2. Not all employers offer Rollover Roth IRA options.
The Mega Backdoor Roth IRA is a mega-savings option for high-income earners. It opens the doors to high savings rates and significant tax savings over time.