In this episode of Adam Talks, Adam Bergman, Esq. discusses the Mega Backdoor Roth Solo 401(k) plan, and how you can still put away over $66,000 for 2022 if you filed an extension for your tax return. The deadline is October 15!
There’s Still Time to Contribute up to $66,000+ in a Roth
On this episode of Adam Talks, tax attorney Adam Bergman discusses the concept of the Mega Backdoor Roth contribution and its advantages for retirement planning. He explains that individuals can contribute over $66,000 into a Roth account until October 15, 2023. This strategy is particularly applicable to those with a Solo 401(k) plan, as it allows for maximum flexibility without navigating certain ERISA restrictions.
Bergman also highlights the benefits of the Solo K, which is ideal for maximizing Mega Backdoor Roth contributions. He emphasizes the contribution limits for individuals under 50 and those over 50, which are $61,000 and $67,500 respectively for the 2022 taxable year. Overall, the strategy allows individuals to make substantial after-tax contributions to their Roth accounts, providing an opportunity for tax-free growth and withdrawals in retirement.
Another part of this episode focuses on the opportunity for individuals to have a side gig or business while working full-time for another company. Bergman explains that even generating a few hundred dollars a year qualifies as being in business. He discusses the three buckets of contributions in a Solo 401(k): employee deferral, profit sharing, and the mega backdoor. The mega backdoor allows for dollar-for-dollar contributions up to the specified limits for the year.
The importance of having enough income to contribute to the Solo 401(k) is emphasized, with contributions not exceeding the amount earned from the business. Multiple sources of income can allow for contributions to both a Solo 401(k) and other retirement plans, but there are limitations based on earnings and contributions. The advantages of the Roth option are highlighted, including tax-free distributions.
The process of setting up a Solo 401(k) is explained, including the option to work with IRA Financial and set up bank accounts for after-tax and Roth contributions. The ability to move money from the Roth component of the 401(k) to a Roth IRA is also mentioned. Bergman concludes by encouraging individuals to set up a Solo 401(k) before October 15th and take advantage of the opportunity to boost their Roth assets.
To learn more, please listen to the entire episode!