The biggest retirement benefit you’ve never heard of (Mega Backdoor Roth IRA)

The first thing to know about mega backdoor Roths is not everyone is eligible to do this. So in our practice, we find particularly those in the tech or healthcare space, at publicly traded companies have, have, have eligibility to do a mega backdoor Roth. So what like? What is it? So, like, at its base, at its like Foundation, what you’re doing in a mega backdoor Roth is one you are maxing out your employee for 1k contributions. Let’s just take an example. Oakley traded company, 401 K offered to the employee. The employee puts money and maxes out in that calendar year into the 401 K. What they may not know about is this, this firm, or that that record keeper may permit them to do after tax contributions in above and beyond what they’re doing into the into, say, their pre tax 401, k, then what happens is, if they make that contribution, which can be upwards of another 30 plus $1,000 on top of what they’ve already done into their 401 k, the plan may allow, and this is where it’s important to check is to do an implant Roth conversion of that after tax amount with the mega backdoor Roth when you are making that after tax contributions, one thing to know is that the earnings upon distribution could be taxable. So where the kind of the key point of doing the mega back door, Roth and hence, the back door is when you’re making those after tax contributions. There’s plenty of employers. We have clients at Google. Google is one of them where they will automatically, if you, if you enroll, they will automatically convert those after tax directly into the Roth 401, K bucket, and since you’re there’s really no earnings then and then, therefore there’s no tax due on that conversion. So where we see the greatest impact for clients are those that are employers and record keepers, where they permit in plan Roth conversions, preferably those that are automated and automatic, so you don’t have to think about, Hey, am I going to owe tax on the earnings into the after in that after tax bucket, because it was immediately converted to your Roth. So that’s where we see the best, best usage and benefit declines.