Ed Slott

speaker

299 appearances 3 recordings 1 series first heard Jan 2018 last heard Apr 2022

Ed Slott’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Little-Known Tactic Lets Retirement Savings Grow Tax-Free · 16 Jul 2021 podcast

There are income limits on who can put money into a Roth IRA as a contribution.

But for this after-tax, that's why we call it the mega backdoor Roth IRA, there are no income limits.

So if you have the money, and that's the other key part,

You have to have the disposable savings to put in there.

Not everybody has an extra $30,000, $40,000 laying around, but some people do.

A typical situation might be a married couple working where one spouse is making a lot of money, which supports the whole family, and the other spouse has a job at a company that has this 401k that offers after-tax money.

And he or she says, you know what, my spouse's income is good enough for the both of us.

Why don't I just dump all of the extra?

I don't even need this money to live on.

Basically, if it comes out, it's coming from their own personal savings.

It's like really moving it from one pocket.

to another.

One pocket is where you had, say, your taxable savings or in a brokerage account, something which is taxable.

You take that out, put it into this after-tax account, then bring it back to your Roth IRA.

And in the end, when the smoke clears, all you did was move from one pocket, taxable,

Now you're loading up a Roth IRA with an extra 30, 35,000, maybe even more every year if you can do it without income limits and you could really pile up money tax-free, growing tax-free, remember, in your own Roth IRA.

And remember, when you start to get close to retirement, most pre-tax accounts have required minimum distributions.

that start at age 72.

Not so for your Roth IRA.

There are no lifetime RMDs, required minimum distributions.

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