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Your Guide to the Mega Backdoor Roth IRA

Texas Capital Bank Private Wealth Advisors break down how Austinites can take advantage of this savvy investment strategy

  • By TRIBEZA Studios
  • August 16, 2024
Executive director during a business meeting – Texas Capital Bank Private Wealth Advisors

You have lifestyle expectations. Perhaps you want to put away money for retirement or a piece of property on Lake Travis. Maybe a family safari to the Serengeti is calling your name. Whatever your financial aspirations are, a Mega Backdoor Roth IRA with Texas Capital can help you achieve and maximize these resources to achieve these goals. 

What is a Mega Backdoor Roth IRA?

A Mega Backdoor Roth IRA is a strategic method for high earners to contribute to a Roth IRA even when direct contributions may not be allowed due to income limits ($161,000+ for single or head-of-household filers and $240,000+ for married couples filing jointly in 2024). This strategy allows earners to contribute after-tax dollars to a 401k and then convert it to a Roth IRA. 

There are a few stipulations, though. Your employer’s 401k plan must allow after-tax contributions and it must also allow for in-service distributions. You can max out your annual pre-tax contributions at $23,000 if you’re under 50, and at $30,500 if you’re 50+ in 2024. Additional contributions, up to a total of $69,000 if under age 50 and $76,500 if over age 50, can be made with a combination of employer-matching contributions and after-tax contributions. 

Why is a Mega Backdoor Roth IRA so Savvy?

This strategy is a savvy approach to diversifying your retirement income with tax-deferred and potentially tax-free options, which help to best plan for unknown tax environments down the road. 

There are certain steps that must be followed in a timely and orderly process to achieve this strategy. The Texas Capital team is there to help its clients every step of the way, no matter your current financial situation. 

A Mega Backdoor Roth IRA could be a smart decision for high-income earners. 

Schedule an appointment with a Texas Capital private client advisor to learn more and other strategies to achieve your financial goals. 

Learn more on the Texas Capital website

Disclaimer:

Texas Capital is the collective brand name for Texas Capital Bank and its separate, non-bank affiliates and wholly-owned subsidiaries. Advisory services are offered through Texas Capital Bank Wealth Management Services, inc. d/b/a Texas Capital Bank Private Wealth Advisors (“pwa”), a registered investment adviser and a wholly owned subsidiary of Texas Capital Bank (the “bank”). PWA and the bank do not provide tax or legal advice and this material should not be relied on for such advice. Consult your own tax or legal advisors for advice specific to your situation.