Mega Backdoor Roth
A strategy using after-tax 401(k) contributions (beyond the standard pre-tax limit) followed by an in-plan Roth conversion or rollout, allowing an additional $43,500+ per year (2024) in Roth savings.
Understanding Mega Backdoor Roth
The mega backdoor Roth requires that the employer's 401(k) plan allow after-tax contributions and in-service distributions or in-plan Roth conversions. In 2024, the total 401(k) limit is $69,000, meaning those who max the pre-tax $23,000 can potentially contribute up to $46,000 after-tax and convert to Roth. Not all employers offer this option.
Why This Matters for Retirement: Understanding Mega Backdoor Roth is essential for making informed decisions about tax-free retirement income strategies. Whether you are evaluating an IUL policy, planning Roth conversions, or comparing retirement vehicles, this concept directly affects your outcomes.