How to set up a mega backdoor roth ira the right way

The Mega Backdoor Roth takes investing in a traditional 401(k) to the next level for high-income earners. If you meet the eligibility requirements, you could stash an extra $41,500 for retirement in a Roth IRA.

Why the Mega Backdoor Roth?

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

What is an 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. They both have tax savings, either now or later.

The Mega Backdoor Roth IRA

The Mega Backdoor Roth IRA allows you to  maximizing your contributions to a traditional 401(k)

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. 3) Regulations may change.

The Bottom Line of a Mega Backdoor Roth IRA

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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