Can I Make A Mega Backdoor Roth Contribution?
In certain cases, you may be eligible to make a Mega Backdoor Roth contribution. At a high level, this involves you making a non-Roth, after-tax contribution to your 401(k), then rolling it out of their 401(k) into a Roth IRA. Under the right circumstances, this can allow you to contribute tens of thousands of dollars into a Roth IRA. However, the rules are very restrictive and prohibitive for most people, and can be difficult to navigate.
To help make the analysis easier, we have created the “Can I Make A Mega Backdoor Roth Contribution?” flowchart. It addresses some of the most common issues that arise if you are trying to make a Mega Backdoor Roth contribution. This flowchart considers:
The maximum amount that can be contributed
The impact of the ACP test
401(k) plan-specific features providing in-service distributions and/or separate accounts
The tax impact upon rollover
The step-by-step process to complete this kind of contribution
Robert J. Pyle, CFP®, CFA, AEP® founded Diversified Asset Management, Inc., in 1996 to provide personalized, comprehensive wealth management services to successful individuals, families, single women, and business owners. His specialty is addressing the complex financial needs of self-employed professionals, corporate executives, and small-business owners. Our disclosure can be found here. The views, opinion, information, and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting, or tax advice.