Mega backdoor Roth - Don't Miss this Opportunity while you're still earning paychecks

 


  • When can you withdraw: You have to be at least 59.5 years old and your account has to be at least 5 years old.

  • The five-year period begins with your first contribution to any Roth IRA.

  • The 5 year rule restarts with every Roth IRA conversion.

  • When you withdraw, withdraw the oldest contribution first, then the conversions second, then earnings last.

  • Total contribution limit in 2024 is $69,000. You can put all this money into your Roth IRA via the mega backdoor Roth. Every year the limit increases. Imagine how much money is growing tax free using this method.

  • For a NON MEGA backdoor Roth conversion: there are no limits (be mindful of your tax bracket and don’t bump it up by over converting therefore paying more taxes unnecessarily. I have more information on this in another blog post.

  • Sign up for a Roth IRA in the same financial institution used by your employer. This makes the transfers and steps easier for you. I made the mistake of transferring my after tax  contributions into a Roth IRA I established at a different financial institution. They ended up mailing me a check of my contribution. I then had to mail that to the non-partnered institution. A lot of extra steps that I would like to avoid in the future.  

  • You can have multiple Roth IRAs for multiple jobs if each job allows you to do the mega backdoor Roth conversion. However, the total amount you can put in on all those accounts combined is $69,000 in 2024 per the IRS (read more here). $76,500 including catch up contributions if you are over 50.

  • Always take tax brackets into consideration. If you have room to do this without increasing your tax bracket then you should do it. You can also do partials: contribute partially in pre-tax and partially in post-tax to make sure you stay in your preferred tax bracket.


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