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MEGA BACKDOORROTHGUIDE

What is a Mega Backdoor Roth?A mega backdoor Roth is a retirement contributionstrategy that allows a 401(k) plan participant toincrease their after–tax contributions to their Roth401(k) to a maximum of 67,500 a year if 50years old ( 61,500 50 years).The IRS limits how much a 401(k) plan participant can contribute toa 401(k) and still get tax benefits. Currently, the maximum personaldeferral you can save into a 401(k) is 20,500 per year ( 27,000per year if you’re 50 or older).You can use a mega backdoor Roth strategy to contribute upto an additional 40,500 in 2022 to your 401(k) via after-taxcontributions into your 401(k) for a combined total of 67,500 ayear if 50 years old ( 61,500 50 years).DIFFERENCE BETWEEN ROTH401(k) AND MEGA BACKDOORROTH 401(k) CONTRIBUTIONSRoth 401(k) Contributions are made via apersonal deferral from yourpaycheck directly into theRoth portion of your 401(k). Allowable contributions up to 27,000 per year ( 20,500per year if you’re 50 or older).Mega Backdoor Roth 401(k) Contributions are made viaa personal deferral from yourpaycheck directly into theafter-tax portion of your401(k). Allowable contributions up to 40,500 per year1. Contributions made to theafter-tax portion are rolled intothe Roth portion of the 401(k)using an in-plan conversion.This process enables theearnings to grow tax free.Steps to maximizing your 401(k) Roth contributions:1. Maximize your annual personal deferral Roth contributions up to 20,500 per year ( 27,000 per year if you’re 50 or older).2. Ensure your employer offers a 401(k) plan that allows after-taxcontributions AND in-plan conversions. This means your planallows you to put in excess after-tax money above and beyondyour personal deferrals and convert those contributions to Rothassets (which is what allows your earnings to grow tax-free).3. Log into your 401(k) account and designate the incrementalamount of after-tax contributions you’d like to defer from yourpay check to your 401(k) (up to 40,500 a year).4. Initiate an in-plan Roth conversion to transfer the 40,500 intothe Roth 401(k).Tax DiversificationTax diversification is the strategic allocation of assets among multiple investmentaccounts with varying tax rates. It is used by individuals to increase their after-taxinvestment income in retirement without having to increase their savings rates.For many savers, contributing to a Roth plan is a key part of a tax diversificationstrategy. However, it is difficult for high earners to contribute to a Roth IRAbecause of income limits. A mega backdoor Roth solves this problem by enablinghigh earners to contribute up to 67,500 a year ( 50 years) using the steps laidout above.1Assumes individual contributes maximum personal deferral of 21,500 50 years and 27,000 50 Years.Investing in securities involves the risk of loss. Past performance is no guarantee of future results. Intended for use byemployers considering or sponsoring retirement plans; not for personal use by plan participants. 2022 Fisher Investments2

Roth Comparison TableView the table below to understand the differences between the types of Roth Accounts.IRA sWho It’s For1401(k) RothBackdoor RothMega Backdoor RothA Roth account that iswithin an employer 401(k)Individual converts pretax 401(k) assets to Rothvia an in-plan conversionin order to diversify taxtreatment of retirementincomeIndividual contributesto their after-tax bucketwithin the 401(k), thenconverts the assets to Rothvia an in-plan conversion toavoid taxes on earnings 214K Married FilingJointlyNoneNoneNone 6K 50 Years/ 20.5K 50 Years/ 7K 50 Years 27K 50 YearsNo limit to assets that canbe converted to RothUp to 40.5K1Individuals making lessthan 144k/year, lookingto contribute a smallamount toward retirementon a post-tax basisHigh-earners who can’tcontribute to Roth IRAIndividuals in a lower thanusual tax bracket, or whohave room for additionaltaxable income withoutincreasing their tax rateIndividuals looking tocreate a significant portionof tax-free income inretirement, and can affordto defer income todaywithout the tax deductionA Roth account that is setup for an individual 144K Individual/Individuals looking for taxdiversification in retirementTotal Annual Contribution Limit is 61,500K 50 years and 67,500 50 Years. An individual can contribute up to 40,500 assumingthat they also contribute the maximum total employee deferral contribution limit of 21,500 50 years and 27,000 50 Years.Roth 401(k) to Roth IRA Roll OverIf you are leaving a job that provides a Roth 401(k) account, your accountcan be rolled over to a Roth IRA or Roth 401(k) without incurring taxes.Often, it’s best to roll over your Roth 401(k) to a Roth IRA, rather than toanother Roth 401(k) because it allows you to avoid required minimumdistributions (RMDs) at age 72.Using a direct rollover, which transfers funds directly from your current Rothaccount to your new one, reduces the potential for tax complications.Investing in securities involves the risk of loss. Past performance is no guarantee of future results. Intended for use byemployers considering or sponsoring retirement plans; not for personal use by plan participants. 2022 Fisher Investments3

Roth 401(k) Case StudyGrowth of 401(k) with Mega Backdoor Roth Max Out StrategyAssumptions Starts saving at age 50 Contributes 27,000 to traditional 401(k) and 40,500 ayear to his Roth 401(k) via an in-plan conversion annually Assumes 7% growth each year 1,882,444 1,129,466 1,065,39360% of savingsis tax free atwithdrawal andcontinues togrow tax-free. 639,236 482,847 289,708 193,1395 Years 752,977 426,15710 YearsTaxed at Withdrawal15 YearsTax Free at WithdrawalA Roth strategy may not be best for all plan participants which is why it is important to hire aplan advisor that provides one-on-one guidance tailored to the needs of the plan participant.Key Takeaways A tax diversification strategy can be an impactful part of retirement planning for plan participants. Roth options within the 401(k) are often the only tax-advantaged way for highly compensated employees to savefor tax-free retirement income. Utilizing a mega backdoor Roth strategy ensures the owner is able to maximize their personal contributions everyyear.Helpful ResourcesRoth 401(k) GuideTax Treatment ChartTax DiversificationSee how plan participants canleverage a Roth 401(k) featureto pay fewer taxes and increaseretirement income.Compare how different types ofretirement accounts are taxed.What plan participants need toknow about tax diversificationto reduce taxes and increaseretirement income.4

Are you leaving money on the table?When you look at all the money left on the table with an averageplan, it’s hard to see why anyone would settle for less.Poor service, which leads to lower savings rates and lowerperformance, combined with high fees that take a big chunk outof your portfolio, result in less money at retirement. You’ve workedhard to get to this point. Now’s not the time to settle for less.Contact us today to see how Fisher 401(k) Solutions can help youand your employees create more wealth.REQUEST FREE CONSULTATION5

employers considering or sponsoring retirement plans; not for personal use by plan participants. 2022 Fisher Investments. Tax Diversification. . Contact us today to see how Fisher 401(k) Solutions can help you . and your employees create more wealth. 5525 NW Fisher Creek Dr., Camas, WA 98607. 844-238-1247.