Mega vs Regular Backdoor Roth: What's the Difference?
For high income earners, the Backdoor Roth conversion is a popular way to get around the income limits that prevent high earners from contributing directly to a Roth IRA. The Mega Backdoor Roth, on the other hand, is not just for high earners. However, a high income is necessary in order to get close to contributing up to the maximum, which is probably why they put “Mega” in the name. In this article, I will talk about the differences between the two backdoor conversions so that you can decide which one is right for you.
What's A Mega Backdoor Roth?
If you like your Roth IRA for its tax-free growth, you’re really going to like a mega backdoor Roth! Contributions to a Roth IRA are funded with after-tax dollars and earnings grow entirely tax-free. Similarly, a mega backdoor Roth is also funded with after-tax dollars and earnings grow tax-free but with a much higher contribution limit!