In certain cases, clients may be eligible to make a Mega Backdoor Roth IRA contribution. At a high level, this involves a client making a non-Roth, after-tax contribution to their 401(k), rolling it out of their 401(k) plan and into a Roth IRA. Under the right circumstances, this can allow the client to contribute tens of thousands of dollars into a Roth IRA. The issue is that the rules are very restrictive and prohibitive for most clients.
To help make the analysis easier, we have created the “Can I Make A Mega Backdoor Roth IRA Contribution?” flowchart. It addresses some of the most common issues that arise for a client trying to make a Mega Backdoor Roth IRA contribution. This flowchart considers: