Mega Backdoor Roth IRA: Is It Really Mega?

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

The backdoor option was designed for high-income earners to make a regular Roth contribution using tax-deferred earnings.

You could call the mega backdoor option mega as it offers a more considerable after-tax contribution into a Roth 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.

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.

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