White Coat Investor Podcast WCI #430: Backdoor Roth - Standard and Mega
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Jul 31, 2025 Dive into the world of Backdoor Roth IRAs as the hosts break down common pitfalls and provide clarity on IRS regulations. They explore the Mega Backdoor Roth strategy, highlighting who can benefit and how to maximize retirement savings. Listeners are guided through recharacterization processes and the implications of changing marital status or income on contributions. Get insights into managing after-tax 401(k) contributions, empowering you to make informed financial decisions and optimize your retirement planning.
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Handle Backdoor Roth Interest Properly
- Convert the entire traditional IRA balance, including small interest accruals, to Roth without worry.
- Pay taxes only on the small earnings portion; no penalties occur from slight excess over the contribution limit.
Fix Roth IRA Excess Contributions
- Recharacterize excess Roth IRA contributions into a traditional IRA to fix mistakes.
- Complete the recharacterization by October 15th of the following year to avoid penalties.
After-Tax vs Roth Contributions
- Mega Backdoor Roth requires after-tax contributions and the ability to convert them to Roth.
- Differentiating after-tax and Roth accounts is crucial since they are distinct within 401k plans.