$60,000 in a ROTH Every Year!? - The Mega Back Door ROTH

talking about Roth Roth accounts how to have more it's it's better than that it's the mega backdoor Roth this is ooh this is which if you didn't know is how you can get more than 60 Grand per year into a Roth account that can come out tax-free at retirement and you can self-direct it and invest in whatever the freak you want yeah I don't have to just buy mutual funds yeah and you know I had a phone call with a client yesterday we were talking about the charitable remainder trust we're doing some additional strategies with CRT and some crypto and some real estate and the client said and they go and his wife was on the phone she's like well I want to do a Roth strategy too can we do that inside of CRT and I go no they're kind of brother sister we do the Roth over here and we do the CRT over here but they can work in concert and we talked about some strategies there and then they go well hold it how much can I put into a Roth and I said with the mega back door Roth freaking over 60 Grand and they're like brains blown and then the husband said this well I can't get to it until I'm 65 and I'm 55 now I don't want to wait 10 years I go whoa you can access the Roth IRA at 59 and a half it's like a tax-free ATM just pull out whatever the freak you want at 59 and a half he goes what I go if you had the Ross for at least a year already yeah I've had a Roth for a while it's only got a few thousand in it I go five years or 59 and a half whichever is earlier yeah it's all yours baby but also here's the cool thing about the Roth the contributions you put in can come out tax-free whenever you want it's the earnings and growth you got to wait till you're 59 and a half and this is why we're doing the mega backdoor Roth today because it's like the Roth on steroids so in the Roth was on steroids and also worked out every day that's what it's like we want to make sure you know what the heck a mega backdooroth is over 60 000. per year into a Roth account I know many of you are like I thought I could only do six thousand or maybe only do twenty thousand I can't do anything I make too much money I make too much exactly yeah no no no we're gonna cut through the BS and let you know how you can do it um and go over the strategies and how it adds up then this time let me say this this is why you got to know this stuff and be informed because a lot of people are going to give you the quick easy answer of just no because when people don't know your financial advisor your CPA they're uninformed they want to just say no you can't do it because they look they're going to look like a when they try and tell you how to do it because they don't know so we're going to teach you here's how you do it and go through the technical rules on how it Stacks up where you get to over 60 000 here all right now in the mega backdoor Roth it all starts with the basic Roth and we've got to dispel some myths uh Matt what does this tell us all right the first thing you're going to do is you want to put 6 000 bucks in a Roth IRA and the myth Mark's talking about is a lot of people know if I'm high income I can't just drop 6 000 bucks into a Roth and we got the slide here outlining what's height you know High income here just for those on the podcast you know have the benefit of seeing the video here you know if you're making over basically 200 Grand married 125 000 single you're going to be phasing out on this and you can't go in what we call the front door for a Roth IRA but there's another door you see six or seven thousand so we've got to make that distinction that if you're under age 50 it's six grand if you're over 50 or older it's Seven Grand and so what a lot of CPAs say or financial advisors is you make too much money you can't do a Roth and that's they don't tell you a couple extra strategies or rules which we're going to unveil now but before we go to the next slide I want to point this out too some people go well I'm too old you're never too old to do a Roth period and then people go you said you could do this with your kids yeah I've got kids that are two years old with a Roth all they have to have is earned income now you gotta have a unique scenario and it's a small business that could have the two-year-olds you know maybe they're you know the child actor but you got to have you know but definitely your teenagers and those people work in the family business are great for the kid roths they have income or they got their summer job or whatever the point is again any age two-year-old or 92 year old can have a Roth IRA with a little earned income so that myth is dispelled and we don't care what your income level is so here's this next slide Matt um show us how this works all right so I said you know you can't go in the front door so what we're going to do is this is called the back door Roth and you may have heard news the back door Roth IRA is getting closed and shut out there's legislation on that last year it didn't pass the back door Roth is not been locked shut it's still open you can still go through a dark so what what the back door Roth means is is you don't qualify to make a deductible traditional IRA contribution if you're high income but you can still make a traditional IRA contribution it's just non-deductible well why don't I make a non-deductible tradition IRA contribution I'm high income and I'm going to convert it to Roth you can convert non-deductible traditional contributions over to Roth and so that's all we're doing it's kind of this two-step process it's commonly known as the back door Roth we have prior podcast episodes just on the back door Roth but this is an important one because this is the easy one for a lot of people they're just like guys I don't have 60 Grand to throw in every year but I got six or even if you're like dude I got as much as I can throw in well let's do this Mega backdoor 401K Roth and the Roth IRA to get to this even higher number okay but notice off to the left on this slide we were told by our current CPA or financial advisor um can't do it they're wrong now notice the little however now for those again listening I'm pointing out the different sections of this slide that this is why a lot of financial advisors will say you can't do it because they're thinking two steps ahead and don't tell you this but it's a fair point is that if you have old traditional IRAs again you have to convert those to Roth first but what they don't say is let's let's see if we can track the code here what can we do with that old Ira oh we could roll it into a 401k that you've got sitting over on the Shelf here and that rule is gone or hey do you want to do some chunking and convert some of that other Ira yeah I would Tom yeah okay we probably want all that to be Roth anyways right so they don't take the time to say that there's some ideas here that could work you know and so it just drives you crazy all right yep okay now the next slide oh my gosh this is step two okay in the stacking to get to the okay I'm going to show the slide just so you know where we're headed this is the coolest slide this is the Mega backdoor Roth cylinder of power yeah this is going to show you how we stacked this bad boy up and we get to our levels yeah and just so everyone listening again on our YouTube You're we're adding up how these numbers add up to get to the over 60 000 here we're talking about so there's a couple there's really three little amounts in the cylinder of power or cylinder power Okay so we've got to go back to the um grid spreadsheet here and step one was get your Roth 401 step one was get your Roth IRA funded and if you need to convert some old traditional money do it or move it to a 401k and back and get rid of that rule um but step two is okay now I've got to use the 401K strategy okay now in this grid for those of you listening on the podcast and uh what I'm showing here is within the 401K there's two or three pieces which the cylinder of power we'll show you in a moment the first piece is okay I'm setting aside your Roth IRA okay that's really the first step but in the 401K there's kind of an ABC the first part of the 401K is your deferral you know how much do you want to defer now you might be doing a little bit of deferral at your day job and getting a match love it we call that matching out get the match get the hell out but then in your solo 401K for those that have that strategy you're going to do the rest of your deferral in your solo or if those of you that just have a day job you're going to defer your entire amount even if you don't get a match on the whole thing this year the diagram shows 20 500 if you're under 50 27 000 if you're 50 or older then Part B of the 401K is this matching thing now why I say there's a b and a c is if you're at a day job they're only going to match up to so much so we've got to add another piece which is called this non-deductible 401k contribution or if you have a solo 401K you might do it through a match strategy with your S Corp or to this non-deferral now I know I just said a lot of things that sounded girdlygoop be patient with me but what I'm just trying to say is the 401K is not just one check it's made up of one two or three pieces to get that next because we got to stack this thing to get to that Mega back door back door Mount some of you would just like say oh where do I write a check and it's not that easy so so you got to be patient with me okay and and it does take kind of like the back door Roth IRA we showed where you're making that non-deductible contribution you convert to Roth in the 401K it's actually called after tax it's similar in that you don't get a deduction on it but it's this after tax contribution which you make a Roth conversion on so it's kind of like once I did that twenty thousand five hundred of straight Roth now I'm doing after tax contribution converting to Roth It's Kind of a similar process now here is the cylinder of power all right now this is the under 50 and we've got the 50 and over so just under 50. let's let's show what this looks like so the first thing is is the bottom portion of the cylinder is your individual Roth we already talked about that you're under age 50. here's your six grand yeah then you've got your 401k employee contribution that can be straight Roth that's yeah there's no conversion this is straight yeah now what's your take on this see this little match thing yeah what's your take on that well some of you let's say you have the the day job 401K right um they're they're throwing in a match likely in that but you can convert that to Roth let's say maybe they threw in 5 000 of a match on your 20 500. um you could convert that five grand to Roth boom right there yep okay now and but if you don't let's say you they don't match anything they're like you're on your own you want to throw in money throwing money and there's some 401ks like that um then you're just at the 25 and then we keep going up the cylinder here because we can still get more in everything you're putting in is either Roth or going to be converted to Roth and that's okay now in our cylinder of power individual Roth at the bottom then your your deferral get any match you can fine if the employer does it then you go up to the last piece of the cylinder and this is what Matt clarified for me earlier and it's properly typed here it's called the after tax employee traditional contribution the reason why I like this then a match if you're in a Solo 401k is you can take a lower salary and get there yeah see a lot of people say oh if I do a match it's 25 percent of whatever my salary is on top of my deferral well this is a new strategy we've learned in our accounting law firm in the last two years is over to the right side you can see that if I take an optimal payroll amount of 66 Grand I can defer almost the entire thing and to Roth money by doing this after tax thing now if you need to take a bigger salary because your company made more money take a bigger salary stay out of hot water with the IRS but if you are if you have some flexibility to take a lower salary your sweet spot here is 66053 yeah and remember that's going in now this is on your W-2 too and so you've got to have the earned income also so you've got to at least have that amount of earning earned income this is whether you're self-employed doing the solo or you got the day job you know 401K at Dunder Mifflin and so you're you're able to do this both now most 401ks like definitely our solo okay allows for after tax most company 401ks actually allow for after tax it's more the exception that it that a big company 401K does not allow the after tax so um so it's it's pretty widely available it's basically what I'm trying to get at here um it's just learning how to execute it and pull it off that sometimes that's where you can get tripped up you call HR your 401k administrator at the day job and they're like I don't know um or they say no because they don't know how to do it so this is this is the strategy and the hard part really is this after tax amount because it's got to go in as after tax it's on your W-2 or actually is it not on the W-2 I think we actually realize it's not on the W-2 is that right the after tax oh the after tax is in box 13. so it's a box on the W-2 yep okay and for you accountants out there you're you're you want to make sure okay so can I all right let me let's get to this is going to get geeky from it I can yeah you see the geekness coming that's like this is coming out yep here it comes here's the geek okay right now it's April uh we're recording this uh what April 12th 13th it's going to go live today tomorrow we want you to have this entire in in before the deadline and make sure all of you come to the summit next week after the tax deadline but but here's here let's get real notice up in the slide it says 2022. the reason why is you've got a plan for this no later than January of the year you want to take it of the prior Year sorry of the subsequent year you want to take advantage of so if you want to do a mega back door for 2022 you're going to be putting some of this information on your W-2 in January of 2023 because see this has got to all add up for 2022 and that's why we're sharing it now now you can do some of this Mega back door for 2021 still but if you missed some of this on your W-2 three months ago in January yeah the ship already sailed so we can't get the entire 61 Grand in this example or 67 Grand if you're under age 50. yeah um but you could maybe do the employer contribution and convert that to Roth for if you're looking at 2021 so there could be a couple things you could do because employers not do um and again it's going to turn on your salary and everything but let's say you had a hundred thousand dollar W-2 that's 25 Grand you could throw in as as company match come employer contribution you can convert to Roth again not the regular way to do it because it takes a higher salary but I'm just saying it's a save for those of you that didn't get this right in 2021 yet yeah and literally I have a call with a client right after this that is literally saying okay what do I put in my 401k because see the cool part about this is if you're planning properly you can put the numbers on all the right forms in December January up until April 15th whatever but you actually don't have to put the money into your 401k until the date you file your tax return with extensions so if you extend next week on April 18th and you've put the numbers in the right spots on your W-2 you're okay you still have time to put the money in um is so anyway that's that's the bad news so you CPAs out there make sure that you're putting these numbers in the right boxes on the W-2 in January for the previous year you're trying to pull this off that does that make sense yeah yeah and those with like the day job 401K is a little more trickier because you don't have a lot of flexibility you're dealing with HR and your W-2's cut yeah you know they ain't getting to change so you got to be on it but those you self-employed you get a little more flexibility because you know you're the boss okay now here's the climax of The Show for those under age 50 is look up in the top right hand corner your maximum Roth for this year in 2022 can be 67 000. each if you're married yeah oh my gosh you just did 134 000 in Roth as a married couple some of you are like I don't even make that much money that's all right someday you will that's the beauty of this you can work your way up in the cylinder of power you know it's okay all right I'll let Matt show the next slide you know climactic moment here up in the right hand corner of those 50 year older where are we at yeah the cool thing about those 50 or 50 and older is you get to put more in the IRS is trying to incentivize those 50 or older who want to throw more in to put more in plus plus we're smarter that's right you know we're a little more you know seasoned yeah a little more um they have more wisdom yeah you know I don't know but you also get to put more and what's the number so on the IRA you get an extra thousand so instead of six we're doing seven but on the Roth 401k we're able to do 27 000 that's just the straight Roth 401k employee contribution as opposed to the 20 500. and so what that allows me to do here is now I'm able to throw 74 500 in on a mega backdoor Roth at the end of the day again if you've got a spouse over 50 in the working in the business too you both could be doing that and throwing almost 150 Grand of Roth new contribution dollars in each year you know how slide mat is I mean this is that slick Willy attorney in him notice how he said you could be doing about 150. see he didn't want to do the math of 74 500 times two because he was like and 149 000 doesn't sound as cool yeah you just it's really 149 but you know he was like you know you know what you said about what's a thousand 149 150 you know I mean not an account and I get a I gotta do the fuzzy math it's close enough everybody that's it I'm gonna I'm gonna stop sharing the screen here um and uh just summarize with there is a mega backdoor Roth that exists yeah it is not a what a unicorn whatever it's this is for Real it's real you can do it again this is a Roth IRA that you can self-direct there is a lot in the news this last year with Peter Thiel and his three four five billion dollar whatever Roth IRA that he started in PayPal and Facebook and all these things you can do the same thing with your Rod you can invest in uh any type of small business that you're excited about crypto real estate um startups um so get out there use your retirement account and get to the directed Ira Summit it's it's for real uh yeah tell your accountant

Channel: Mark J Kohler

Views: 189,422

Keywords: tax, legal, entrepreneur, asset protection, wealth building, cpa, attorney, lawfirm, Mark J Kohler, Mark Kohler, Crypto, Bitcoin, Mega ROTH, ROTH, ROTH IRA, Mega IRA, ROTH ira, roth ira, mega roth ira, taxes 2022, tax refund, taxes, mega backdoor roth, personal finance, Mega Backdoor, backdoor roth, back door 401k, 401k and IRA, ROTH 401k

Id: GV4jJYifgG8

Length: 20min 9sec (1209 seconds)

Published: Tue Apr 19 2022