Kenneth Schnall

Backdoor Roth methods

In this post I'll talk about two backdoor Roth methods and how you can use them.

Backdoor Roth

This method lets you contribute $6,000 into a Roth IRA even if your income is higher than the IRS Roth IRA income limits.

  • Open a traditional IRA (the backdoor Roth method can get complicated if you already have money in a traditional IRA)
  • Open a Roth IRA
  • Contribute money to the traditional IRA
  • Convert the entire traditional IRA balance to the Roth IRA (opt to not withhold any taxes)
  • Leave the traditional IRA open
  • Set up the Roth IRA's investments

Mega backdoor Roth

If your employer's 401(k) plan supports it, this method can let you save an additional $38.5k in Roth. The idea behind this method is to contribute money to the after-tax (non-Roth) bucket of your 401(k) plan and enable daily Roth in-plan conversions, so after-tax contributions get converted to Roth daily.