Mark Kohler breaks down the Mega Backdoor Roth strategy: contribute $7,000 to a Roth IRA, $23,000 to a 401(k), and $46,000 in after-tax contributions, totaling $76,000 yearly. At 10% annual returns, this compounds to $1 million tax-free in about 7.5 years, if you have the discipline to keep saving instead of spending.
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With the Mega Backdoor roth, under age 50, you can have a million dollars tax free in seven and a half years. But it requires you to use some self discipline and not spend every freaking dollar you make and start plowing it away right away. So I want to show you how this looks in a little diagram here. This is the Mega Backdoor Roth. I'm just calling it the Mega Roth because if you make more than a couple hundred grand a year, you're going to have to do the backdoor method. Doesn't matter, we're just going to call it the Mega Roth. It starts here. If you are under age 50, then we're going to have different numbers. If you're 50 or older, then we're going to have different model. So if you're under age 50 this year, you can put $7,000 in your Roth and then your 401k. If you have a day job, they give you a 401k. You can put $23,000 in there and you can choose to have it Roth. That's how it works. You're going to put that away and boom, done, 23,000 plus you're going to get a match from the company. Now the next thing you do, this is what the rich do, an after tax employee contribution and you can do another 46,000 minus the match you may have gotten down below. Because the total you can put away when this whole thing up, the total that you can do is $76,000. Now if you put $76,000 in my calculator, 10% rate of return, seven and a half years, you're going to have a million dollars tax free. And my clients are doing this.
