Mega Backdoor Roth IRA: Is It Really Mega?

[{"selector":"#anim-03346dff-4480-4958-8fa4-833c0269250b","keyframes":{"opacity":[0,1]},"delay":0,"duration":2300,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-6ef9fad6-0157-44b1-83f9-bd543991a1af","keyframes":{"transform":["translate3d(-381.5534%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":2300,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-bdaa1792-8e2d-43ff-b68b-a3603b0796d4","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-c827d5e3-de05-4a56-8a82-0adec388276d","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-31afabba-2a3a-4e60-8ce2-f873b482e13a","keyframes":{"transform":["translate3d(0px, 97.53603%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Learn more

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. However, it’s not for everyone.

[{"selector":"#anim-f61f367a-68b6-43c7-ad5e-40fb28e26d6d","keyframes":{"opacity":[0,1]},"delay":100,"duration":3000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-adc61218-ae2d-4c3d-969a-78c78411235e","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-7ee0b71f-57e0-404b-ac8e-0566954cffca","keyframes":{"transform":["translate3d(-97.25609%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] What Is an Individual Retirement Account An individual retirement account is a savings and investment account with tax advantages. Learn more

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.

[{"selector":"#anim-b7d73c73-444e-473a-a49a-b203950f1a6b","keyframes":{"opacity":[0,1]},"delay":100,"duration":3000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-ee49c27a-972d-4c86-87b9-359f8f2d9ec6","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-f9dc4cac-2e27-478f-94ff-f512aade1602","keyframes":{"transform":["translate3d(-81.99566%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Roth IRA Versus Traditional IRA Learn more

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.

[{"selector":"#anim-bc08aff2-4878-483a-a689-7b16c768e37c","keyframes":{"opacity":[0,1]},"delay":100,"duration":3000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-d732a166-9690-4399-9b5f-aff8e78d460f","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-5918485b-6736-4bb1-aa2b-dabdc93572c6","keyframes":{"transform":["translate3d(-78.26087%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Backdoor Roth IRA Learn more

1. It can rapidly increase overall retirement savings rates. 2. The Mega Backdoor Roth IRA allows for significant tax-deferred growth when done correctly.

[{"selector":"#anim-c32453f0-eba5-499e-b70e-75022a0abe84","keyframes":{"opacity":[0,1]},"delay":100,"duration":3000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-fb790e0d-3e2b-4517-b71c-42f84d350cd2","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-3c6947ba-7c81-416c-8327-5ad2b485d115","keyframes":{"transform":["translate3d(-90.19074%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Mega Backdoor Roth IRA Learn more

1. It’s not easy to contribute beyond the tax-deferred contributions. 2. Not all employers offer Rollover Roth IRA options.

[{"selector":"#anim-b41ad4c6-4fcb-4d75-814d-6497a603f330","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-7db5b281-1abe-4654-b2be-80cde739fd19","keyframes":{"transform":["translate3d(-94.83283%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-935f78bc-89de-4797-a543-586ebaa70a24","keyframes":{"opacity":[0,1]},"delay":100,"duration":3000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] Cons of the Mega Backdoor Roth IRA Learn more

They must work for a company that allows after-tax contributions and Roth rollovers.

[{"selector":"#anim-42efbbde-02b8-4aeb-ae2a-be3b68be9d4a","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-d556d477-c00d-4197-8f00-77af0d727b7b","keyframes":{"transform":["translate3d(-94.83283%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-6543c86b-4a56-4674-b04c-56a8dc8725d9","keyframes":{"opacity":[0,1]},"delay":100,"duration":3000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] Who’s Eligible for a Mega Backdoor Roth? Learn more

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.

[{"selector":"#anim-6edc5203-8463-498d-baef-9faa3144c333","keyframes":{"opacity":[0,1]},"delay":100,"duration":3000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] Read The Full Article

SWIPE UP TO READ MORE ABOUT MEGA BACKDOOR ROTH IRA: IS IT REALLY MEGA?

[{"selector":"#anim-92b2dd4b-31b8-4736-9b16-2e317bcef909","keyframes":{"opacity":[0,1]},"delay":0,"duration":2000,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-2612dcbd-47ec-40de-abf0-acafa6365c73","keyframes":{"transform":["translate3d(0px, -145.15922%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":2000,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Learn more

[{"selector":"#anim-75fbd467-2dd2-4ce4-96d3-9b45d0960975","keyframes":{"opacity":[0,1]},"delay":0,"duration":1000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-8ccde125-9395-4ae8-b286-81fb03a6d516","keyframes":[{"transform":"scale(1)","offset":0},{"transform":"scale(1.5)","offset":0.33},{"transform":"scale(0.95)","offset":0.66},{"transform":"scale(1)","offset":1}],"delay":0,"duration":1450,"easing":"ease-in-out","fill":"both","iterations":1}] [{"selector":"#anim-8c719858-9d8d-42a3-93fd-20931563dcf6","keyframes":{"opacity":[0,1]},"delay":0,"duration":1000,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-6b5bb4c1-1c8b-4a42-b1ea-e0af89e4d5dd","keyframes":{"transform":["translate3d(-161.46791%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":1000,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-2799ca24-6fa7-47c7-8888-b5a9413a0159","keyframes":{"opacity":[0,1]},"delay":400,"duration":1000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-4dc8bb60-f8c5-466f-b366-a6f000573340","keyframes":{"opacity":[0,1]},"delay":700,"duration":1000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-513f0414-07d3-4eb8-a82d-f1e32d28f992","keyframes":{"opacity":[0,1]},"delay":0,"duration":1000,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-df0ea985-5eae-4fda-a3a5-c483fc8f4e42","keyframes":{"transform":["translate3d(-163.30274%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":1000,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-c9873622-19fb-49eb-a845-20d7dd9d72b2","keyframes":{"opacity":[0,1]},"delay":0,"duration":1000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-d422f95c-125f-4775-b2fc-1d268bceaf2a","keyframes":{"opacity":[0,1]},"delay":0,"duration":1000,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-46a5b44d-f27d-4b39-b727-53a6233a0959","keyframes":{"transform":["translate3d(-163.30274%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":1000,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-53930c00-7e50-41e3-b7ad-0147fe0d28e3","keyframes":{"opacity":[0,1]},"delay":0,"duration":1000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] How To Pay Yourself First In 4 Easy Steps Read more How Much House Can I Afford? 5 Factors To Consider Best Personal Finance Tips You Should Know Read more Read more