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The Mega Backdoor Roth: How to Get $70,000 Into a Roth IRA

The Roth IRA contribution limit is $7,000 per year.

But there’s a loophole that lets you contribute $69,000.

If your employer’s 401(k) allows it, this is the most powerful wealth-building hack in the tax code.

What Is the Mega Backdoor Roth?

It’s an advanced strategy that uses after-tax 401(k) contributions to funnel massive amounts into a Roth IRA or Roth 401(k).

Most people don’t know this exists. Even fewer know their 401(k) allows it. But if yours does, you can legally shelter up to $69,000 per year from taxes.

Over 30 years at 10% returns, that’s $12.4 million—completely tax-free.

How It Works

The IRS allows total 401(k) contributions of $69,000 per year (2024 limit). This includes:

  • Your pre-tax contributions ($23,000 max)
  • Your employer match (varies)
  • After-tax contributions (the remainder)

Here’s the play:

Step 1: Max your pre-tax 401(k) at $23,000
Step 2: Get your employer match (let’s say $8,000)
Step 3: Contribute after-tax dollars up to the $69,000 total limit
Step 4: Immediately convert those after-tax dollars to Roth 401(k) or Roth IRA

You just put $38,000 into a Roth account in one year—way more than the normal $7,000 limit.

The Tax Magic

The after-tax contributions aren’t tax-deductible going in. But they grow tax-free and come out tax-free if you convert them immediately.

You’re essentially using your 401(k) as a tunnel to bypass Roth IRA income limits and contribution caps.

The Three Requirements

Not everyone can do this. You need:

1. A 401(k) that allows after-tax contributions
About 30% of employer plans offer this. Check with HR or your plan administrator.

2. In-plan Roth conversions or in-service withdrawals
You need to be able to move the after-tax money to Roth. If your plan doesn’t allow this, the strategy doesn’t work.

3. Enough income to contribute
You need to earn enough to max out pre-tax contributions AND add after-tax on top. Realistically, this works for people earning $150K+.

A Real Example

  • Annual income: $200,000
  • Pre-tax 401(k): $23,000
  • Employer match: $10,000
  • After-tax 401(k): $36,000 (to reach $69,000 total)
  • Immediately convert: $36,000 to Roth 401(k)

Result: You just put $36,000 into a Roth account in a single year, on top of your regular $7,000 Roth IRA contribution.

That’s $43,000 per year in tax-free growth potential.

The 30-Year Impact

Let’s compare two scenarios:

Without Mega Backdoor Roth:
$7,000/year in Roth IRA for 30 years = $1.2 million tax-free

With Mega Backdoor Roth:
$43,000/year in Roth accounts for 30 years = $7.5 million tax-free

That’s a $6.3 million difference in tax-free wealth.

At a 24% tax bracket, you just saved $1.5 million in taxes.

How to Set It Up

Step 1: Check if your 401(k) allows after-tax contributions and conversions. Call HR or log into your 401(k) provider.

Step 2: If yes, increase your 401(k) contribution to include after-tax dollars.

Step 3: Set up automatic Roth conversions (in-plan) or quarterly transfers to a Roth IRA.

Step 4: Do this every year until you retire.

Most plans that allow this make it easy. You just adjust your contribution settings online.

Who Should Do This

This strategy is best for:

  • High earners ($150K+ household income)
  • People who’ve maxed their 401(k) and Roth IRA already
  • Anyone who wants to shelter more money from taxes
  • People planning for early retirement (Roth access rules are better)

If you qualify and don’t use this, you’re leaving millions on the table.

The Catch

The only downside: You need cash flow to do this. You’re contributing after-tax money that you won’t see for decades.

But if you can afford it, it’s the single most powerful wealth-building strategy in the tax code.

$69,000 per year. Tax-free growth. Tax-free withdrawal.

That’s not a loophole. That’s a highway to generational wealth.

Get the Complete 30-day roadmap at: AutomatedWealthBuilder.com.

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Tax-Loss Harvesting: The Free $5,000 Most Investors Ignore

There’s a legal tax strategy that can save you $1,000-5,000 per year.

It’s completely legitimate. The IRS expects you to do it. And 90% of investors never use it.

It’s called tax-loss harvesting, and it’s free money.

What Is Tax-Loss Harvesting?

Here’s the simple version: When investments drop in value, you sell them at a loss. Then you immediately buy something nearly identical.

You haven’t changed your portfolio. But you’ve created a tax deduction.

That loss offsets your capital gains for the year. If you don’t have gains, it offsets up to $3,000 of regular income. And any excess carries forward to future years.

A Real Example

Let’s say you bought $10,000 of VTI (Vanguard Total Market) in January. By November, it’s worth $8,500. You’re down $1,500.

Step 1: Sell VTI for $8,500 (realizing a $1,500 loss)
Step 2: Immediately buy $8,500 of ITOT (iShares Total Market)

These funds are 99.9% identical. Your portfolio exposure hasn’t changed. But you now have a $1,500 tax loss.

If you’re in the 24% tax bracket, that’s a $360 tax savings. Free money.

The Wash Sale Rule (And How to Avoid It)

The IRS has one rule: You can’t buy the exact same security within 30 days of selling it. That’s called a wash sale, and it disqualifies your loss.

The solution? Buy a nearly identical fund from a different provider.

Common Swaps:

  • VTI ↔ ITOT (Total Market)
  • VOO ↔ IVV (S&P 500)
  • VEA ↔ IEFA (International)
  • BND ↔ AGG (Bonds)

These track the same indexes with 99.9% correlation. The IRS considers them different securities. You’re legally in the clear.

When to Harvest Losses

Most people harvest in December before year-end. But smart investors harvest throughout the year whenever an opportunity appears.

Market drops 10% in March? Harvest.
Tech stocks crash in July? Harvest.
Bonds drop in October? Harvest.

You can harvest losses multiple times per year. There’s no limit.

The Long-Term Compounding Effect

Here’s what most people miss: Tax-loss harvesting doesn’t just save you money this year. It compounds.

That $360 you saved in taxes? Invest it. At 10% returns over 30 years, that $360 becomes $6,277.

If you harvest $1,500 in losses every year for 30 years, and reinvest the tax savings, you’ll have an extra $100,000+ in your portfolio.

That’s six figures from a strategy that takes 10 minutes per year.

The Platforms That Do It Automatically

Here’s the best part: You don’t have to do this manually.

Robo-advisors like Wealthfront, Betterment, and Schwab Intelligent Portfolios do tax-loss harvesting automatically.

Every time your holdings drop, they automatically harvest the loss and swap to a similar fund. You don’t lift a finger.

They typically charge 0.25%-0.50% in fees, but the tax savings usually exceed the fee by 3-5x.

Who Benefits Most

Tax-loss harvesting is most valuable if you:

  • Are in the 24% tax bracket or higher
  • Have a taxable brokerage account (doesn’t work in IRAs)
  • Trade frequently or have high capital gains
  • Have a portfolio over $50,000

If that’s you, you’re leaving thousands on the table every year by not harvesting.

The Simple Implementation

Manual approach: Review your portfolio quarterly. When something is down 5%+, harvest the loss.

Automated approach: Use a robo-advisor that does it automatically.

Either way, you’re capturing value that would otherwise disappear. It’s one of the few true “free lunches” in investing.

The IRS allows this. They expect this. They’ve designed the tax code to encourage long-term investing.

Take advantage of it. Your future self will thank you.

Get the Complete 30-day roadmap at: AutomatedWealthBuilder.com.

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Paying Off Your Mortgage Early Is a Terrible Idea

The advice is everywhere: “Pay off your mortgage early! Be debt-free!”

It sounds virtuous. Responsible. Smart.

And it’s costing you hundreds of thousands of dollars.

The Emotional vs Mathematical Reality

Let me be clear: I understand the emotional appeal of owning your home outright. Debt feels scary. Being “free and clear” feels safe.

But emotion and math rarely agree—and in this case, the math is brutal.

The Real Numbers

Let’s say you have a $400,000 mortgage at 3.5% interest. Your required payment is about $1,800/month.

You’re thinking about paying an extra $1,000/month to pay it off faster.

Option 1: Pay off mortgage early
Extra payments: $1,000/month for 15 years
Total paid: $180,000 extra
Interest saved: ~$80,000
Net benefit: $80,000

Option 2: Invest that $1,000/month instead
Investment: $1,000/month for 15 years at 10%
Portfolio value: $413,000
Mortgage balance after 15 years: ~$250,000
Net benefit: $163,000

You just left $83,000 on the table by paying off your mortgage early.

Why This Happens

Your mortgage rate is 3.5%. The stock market averages 10% over long periods.

You’re borrowing money at 3.5% to invest it at 10%. That’s a 6.5% arbitrage opportunity.

Banks do this every single day and get rich from it. Why aren’t you?

The Tax Advantage Makes It Worse

If you itemize deductions, your mortgage interest is tax-deductible. At a 24% tax bracket, your effective mortgage rate drops to 2.66%.

Now you’re borrowing at 2.66% to invest at 10%. That’s a 7.34% spread.

Over 30 years, that difference is generational wealth.

“But What About Risk?”

The objection I always hear: “But what if the market crashes?”

Fair question. Let’s stress-test it.

Even if the market only returns 7% instead of 10% (well below historical average), you still come out ahead by investing instead of paying off your mortgage.

And here’s what people forget: Your home value can crash too. Housing isn’t risk-free—we learned that in 2008.

When It DOES Make Sense

There are exactly three scenarios where paying off your mortgage early makes sense:

1. Your interest rate is above 6%: Refinance first. If you can’t refinance, then yes, pay it off.

2. You’re within 5 years of retirement: You want predictable expenses and less volatility. Pay it off.

3. You literally can’t sleep at night with debt: Your mental health matters. But acknowledge you’re paying $100,000+ for that peace of mind.

What to Do Instead

Take that extra $1,000/month you were going to throw at your mortgage and:

First: Max your 401(k) and Roth IRA (tax advantages beat everything)
Second: Build a 6-month emergency fund (this actually reduces risk)
Third: Invest in a taxable brokerage account in index funds

In 15-20 years, you’ll have enough in investments to pay off your mortgage in cash if you want to. Or you’ll keep the mortgage and live off your portfolio.

Either way, you’ll have options. And options are better than being house-rich and cash-poor.

The Automation Strategy

Here’s how to implement this:

Set up automatic investing of that $1,000/month. Make your regular mortgage payment. Ignore the mortgage beyond that.

Let compound interest do what it does best. In 30 years, you’ll have a paid-off house AND a $2+ million investment portfolio.

Your neighbor who paid off their mortgage early? They’ll have a paid-off house and $200,000 in savings.

That’s the difference between financial security and generational wealth.

Get the Complete 30-day roadmap at: AutomatedWealthBuilder.com.

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