In this discussion, Alex Savage, a seasoned CPA and CFP, dives into the Mega Backdoor Roth 401(k), a powerful strategy for high-income earners. He explains how this method allows individuals to contribute over $70,000 in after-tax dollars, contrasting it with traditional accounts. Alex also highlights who can benefit, including solopreneurs, and the importance of understanding regular versus after-tax contributions. The conversation touches on tax management in retirement, the strategy's role alongside real estate investments, and the need for expert advice when navigating these waters.
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insights INSIGHT
Roths Reduce Future Tax And Policy Risk
Roth accounts use after-tax money so withdrawals and growth are tax-free in retirement.
Roths avoid RMDs and help manage future tax, Social Security, and Medicare exposure.
volunteer_activism ADVICE
Push 401(k) Contributions To The $70k Cap
If your 401(k) plan allows after-tax contributions, use the $70,000 total limit to add after-tax dollars beyond the $23,500 elective deferral.
Convert those after-tax amounts in-plan or via an in-service distribution into Roth to lock in tax-free growth.
insights INSIGHT
Not A One-Size-Fits-All Move
Mega Backdoor Roth fits high earners and super-savers who have excess liquidity and limited current tax sheltering from rentals.
It may not suit early-FIRE seekers or investors in a 0% capital gains bracket who prefer brokerage or real estate investments.
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In this episode of the Tax Smart REI Podcast, Thomas Castelli and Nathan Sosa, Head of the National Tax Department at Hall CPA, sit down with Alex Savage, CPA, CFP, to unpack the Mega Backdoor Roth 401(k), one of the most powerful yet underutilized tax strategies for high-income earners.
They break down how the strategy works, who qualifies, and why it can be a game-changer for those looking to build long-term, tax-free retirement wealth, all while balancing real estate investing and other income streams. From contribution limits and in-plan conversions to control group rules and timing, this episode covers everything you need to know to decide whether this advanced strategy fits your situation.
You’ll learn:
- What makes the “Mega” Backdoor Roth 401(k) different from a traditional or standard Roth IRA
- How high-income W-2 earners and solopreneurs can contribute up to $70,000+ in after-tax dollars
- Why this strategy can help you manage future tax rates, Social Security taxation, and estate planning
- The key testing and timing rules to avoid IRS pitfalls
- When a Mega Backdoor Roth makes sense and when real estate might be the better play
Whether you’re a tech executive, business owner, or high-earning real estate investor, this episode gives you the clarity to determine if the Mega Backdoor Roth 401(k) belongs in your financial toolkit and how to use it strategically alongside your real estate portfolio.
To become a client, request a consultation from Hall CPA, PLLC at go.therealestatecpa.com/3KSEev6
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