Guide To Building A Mega Backdoor Roth

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Do you know how to unlock the power of tax-free retirement savings using a Mega Backdoor Roth? 

In this episode, Mike Jesowshek provides a beginner's guide to building a Mega Backdoor Roth IRA in 2024. He explains the differences between traditional and Roth IRAs, then details how to maximize retirement savings using the Mega Backdoor Roth strategy. Mike breaks down the steps for contributing beyond standard limits, focusing on how business owners can utilize solo 401(k) plans. He also discusses the long-term benefits of tax-free growth and withdrawals, addressing common concerns and mistakes along the way.

Discover the strategies to potentially grow your account to a million dollars in just a few years!

[00:00 - 05:21] Introduction and Basics of Roth IRAs 

• Roth IRAs allow tax-free growth and withdrawals in retirement.  
• Traditional vs. Roth: Traditional IRAs offer tax deductions upfront, while Roth IRAs grow tax-free with withdrawals in retirement.  
• Max contributions for 2024: $7,000 ($8,000 for those over 50).  

[05:22 - 11:18] Backdoor and Mega Backdoor Roth Explained

• The backdoor Roth strategy involves making non-deductible contributions to a traditional IRA and then converting it to a Roth IRA.  
• Mega Backdoor Roth allows much larger contributions using 401(k) plans.  
• Benefits of Mega Backdoor Roth include higher contribution limits, tax-free growth, and tax-free withdrawals.  
• This strategy is beneficial for anyone with access to a 401(k) plan, even those in lower tax brackets.  

[11:19 - 14:08] Strategy Steps and Example

• Max out employee contributions, then after-tax contributions, and convert to a Roth the next day.  
• A business owner can contribute up to $76,000 per year and, with a 12% return, accumulate over $1 million in just 7.5 years.  
• The earlier you start, the greater the potential for tax-free growth.

Direct Quotes:

"The beauty behind a Roth is that you take the pain today, but it grows tax-free, and your withdrawals in retirement are tax-free." - Mike Jesowshek, CPA

"The Mega Backdoor Roth strategy allows you to supercharge your retirement savings with higher contribution limits and long-term tax advantages." - Mike Jesowshek, CPA

"Imagine putting away $76,000 per year into a Roth and seeing it grow tax-free — that’s mind-blowing." - Mike Jesowshek, CPA

Check out this episode’s blog post: https://www.taxsavingspodcast.com/blog/guide-to-building-a-mega-backdoor-roth

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join TaxElm: https://taxelm.com/

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