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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.

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