How To Do A Mega Backdoor Roth Conversion
A mega backdoor Roth conversion consists of many moving parts and can seem confusing if you’re attempting to do one for the first time. At Carry, we simplified it so that you can complete it in just a few clicks!
Step 1: Open your Carry Solo 401k account and locate it within the app
If you haven’t opened your Carry Solo 401k yet, open an account. It typically takes under 10 minutes. Once opened, locate it within the Carry app.
Step 2: Click on Transfer or Withdraw
Go to your Solo 401k dashboard and click on Transfer or Withdrawal.
Step 3: Choose Mega Backdoor Roth
Step 4: Input the amount you want to convert
To calculate how much you can put into your After-Tax account, you’ll need to consider your other solo 401k (and 401k) contributions made for the same tax year.
For example, in 2023, the solo 401k contribution limit is $66,000. The employee limit is $22,500. If you max out your employee contributions, you’ll still have $43,500 remaining. If you made zero employer contributions, then you can contribute up to $43,500 in after tax income to your After Tax account. If you made any employer contributions, or if you have a 401k plan at work and receive an employer match, you’ll have to subtract those amounts.
For example, if you max out your employee contributions, make zero contributions as an employer, but received $5,000 in employer match contributions from your 401k at work, you’ll have:
$66,000 solo 401k contribution limit
– $22,500 employee contributions
– $5,000 employer match
____________________________
= $38,500 in room remaining
In this example, you can contribute up to $38,500 in after tax income to your After-Tax account.
Step 5: Choose “After Tax” as the account you want to convert funds from
Step 6: Select your Roth account as the account you want to send the funds to
Step 7: Review and approve by checking the box
Step 8: Finalize your conversion by clicking on the “Continue with Conversion” button
See what it looks like in action
This is an interactive demo. Click on the dots on the page to see the next step.
Don’t forget to report the conversion in your 1099-R
Mega backdoor Roth conversions must be reported to the IRS using form 1099-R. Once we complete your mega backdoor Roth conversion, we’ll help you fill out the form as needed.