Search

Mega Backdoor ROTH Conversions

401(k) After-Tax Contributions/Mega-Backdoor-Roth:

What is it? Some 401(k) plans have a unique feature that allows employees to exceed the usual $19,500 IRS limit up to the Annual Additions limit of $58,000 (2021) or $64,500 for age 50+

How do I know if I can do a Mega Backdoor ROTH conversion But you need to check with your employer first to verify if they allow both of the following:

1. After-Tax Contributions

2. In-Plan ROTH Conversions


My 401(k) allows for after-tax contributions and I can convert them to Roth. Should I do this? How does it work?


Check out the accompanying informational graphic, but please note the following:

o It only makes sense for you to do after-tax contributions if you are already on pace to max out the $19,500 this year and is planning to immediately convert their after-tax contributions to Roth.



o Once the first after-tax contribution is made, you will then need to call their 401(k) provider and authorize the automatic in-plan Roth conversion. This ensures that moving forward, every after-tax contribution automatically gets converted to Roth and they won't end up paying ordinary income tax on the gains.

35 views0 comments

Recent Posts

See All

Do you have Incentive Stock Options and wondering if you'll face an AMT hit upon exercising? If so, there is handy, free tool you can use to see if AMT would apply to your situation! Click here to ent