At The Money: The Mega Backdoor Roth

The Mega Backdoor Roth is explored as a powerful, yet often overlooked, retirement savings strategy. Dan LaRosa, an expert in qualified retirement accounts, clarifies that this IRS-approved method allows high-income earners to significantly increase Roth contributions within their 401k beyond the standard $24,500, potentially up to $72,000. However, its viability hinges on employer plan design and successful compliance testing, which requires broad employee participation beyond just top earners. While offering tax-free growth and withdrawals in retirement, the strategy demands careful consideration of present-day liquidity needs, as funds are generally inaccessible before age 59 and a half. For self-employed individuals, the Mega Backdoor Roth presents a particularly appealing option due to simplified administration and the absence of compliance testing.