Note that pursuing this strategy only makes sense if you’ve already maxed out your annual 401(k) and IRA contributions and you still have a relatively large chunk of cash that you’d like to get into a Roth IRA. How Does a Mega Backdoor Roth Work?Ī mega backdoor Roth lets you roll over up to $45,000 from a traditional 401(k) to a Roth IRA, all without paying any taxes you’d normally owe with such a conversion. You can get around these constraints, however, by rolling funds from your workplace retirement plans, which have much higher contribution limits. Contributions made to the traditional IRA must abide by the IRS annual contribution limits during the year you make them. There are no income restrictions on who can do a Roth IRA conversion. This almost always involves paying income taxes on any funds being rolled into the Roth account that have not previously been taxed, which is why you’ll want to do this as soon as you can after you deposit funds into a traditional account to minimize potential gains. Then you convert the traditional IRA to a Roth IRA. You can do this by directly contributing to a traditional IRA or by rolling money from a traditional 401(k) account into a traditional IRA. To simplify a somewhat detailed process, you’ll first want to get your money into a traditional IRA. However, a backdoor Roth IRA conversion lets high-earners roll funds from a traditional 401(k) or traditional IRA into a Roth IRA. If your income is above the thresholds above, you cannot directly contribute to a Roth IRA. If you meet these qualifications, you can contribute up to $6,000 ($7,000 if 50 or over) per year in 20. Married filing jointly or qualified widow(er)
Single, head of household or married filing separately (and you did not live with your spouse at any time during the year) Roth IRA Income Limits in 20 Filing status
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