Mega Back Door Roth

Submitted by Michael Morando on Mon, 2020-03-09 17:51

Team Slott,

Is there a white paper that has been written on the details on how to execute the mega back door roth? I am trying to put together a program for one of my clients and can not seem to find specific information on the necessary steps to execute the strategy.

Help!

Best regards,
Michael



Submitted by Alan - IRA critic on Mon, 2020-03-09 17:59

 

Submitted by Alan - IRA critic on Mon, 2020-03-09 18:21

  • There are several articles like this on the web:
  • https://www.madfientist.com/after-tax-contributions/
  • You might also check the bogleheads wiki under “after tax 401k” for a very recent article. Links cannot be copied here.
  • Client should check if their plan offers after tax non Roth contributions and what the plan limit is. Some plans require a limit to avoid breaching the annual additions limit or to prevent ACP test violations. Plans differ in how often rollouts can be done each year, or if such rollovers must go the Roth 401k as an in plan Roth rollover, or can go to a Roth IRA instead. 
  • Since the amount of gains is usually small before doing the rollover, it is best to direct the entire sub account balance to a Roth IRA where permitted rather than trying to do a split rollover, which directs the gains to a TIRA account. 
  • Tax reporting is simple. The rollover goes directly on lines 4c and 4d of Form 1040. Form 8606 does not apply.

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