Roth accounts are a great way to boost your retirement savings. By setting aside money in a Roth account today, the earnings can grow tax-free and be used in retirement. While there are income limits for regular Roth IRA contributions, there is a loophole: the “backdoor Roth” strategy, which can allow for high earners to roll funds from a traditional IRA to a Roth.
High-earning individuals who have 401(k) plans through their employer can also work around existing income limits to create what’s known as a “mega backdoor Roth.” By doing so, they can contribute up to $58,000 to a Roth 401(k), far more than the normal Roth contribution limit of $6,000 per year for savers under 50.
Sound too good to be true? That’s because unless you meet some very specific criteria, it is — and the risks might outweigh the benefits. This Forbes article explains why you may want to think twice before doing a mega backdoor Roth conversion.
This article was written by Forbes, an entity unrelated to HoyleCohen, LLC. The information herein is intended for educational purposes and has been selected by HoyleCohen due to the timeliness of the subject matter.
