Best Los Angeles Financial Advisor For You: Video

You have found the site for the best Los Angeles financial advisor. The FUN CFP is specializes in tax planning and financial planning for the gay community.

Stock Options Basics Get the Most From Your Benefits Now

Are you lucky enough to have incentive stock options? Want to know more about this valuable employee benefits? Read this post about stock options.

Apple Stock For Apple Employees: How To Maximize Employee Stock Options

If you are an Apple employee and do a good job, you will likely own way too much Apple stock as your career progresses. Good problem to have, right? I mean, Apple stock has performed amazingly well over the past …

Maximize or Spend Your Tax Refund? What is the Smart Financial Move?

Waiting for that big tax refund to hit your bank account? You aren’t alone. An estimated 74% of people received a tax refund in 2017 and, according to the IRS, those refunds averaged about $3,000 per filer. Should you blow …

Tax Season Tips – Video Inside the Issues – Spectrum News LA

Filing your taxes doesn’t have to be so stressful. Los Angeles Financial Planner David Rae shares some tax advice with Inside the Issue with Alex Cohen.

4 Crucial Tips to Avoid an IRS Audit via Financial Planner LA

Tax Audit Risk The only thing people hate more than filing their taxes might just be an IRS Audit. Learning of a large tax bill would probably take third place. In reality, the risk of being audited is quite low. …

Spectrum News Tips for Tackling This Tax Season

Spectrum News Tips for Tackling Tax Returns this Tax season. David Rae and Alex Cohen Inside the issue

How Love And Marriage Will Change The Perfect LGBT Retirement.

With Marriage Equality come more options for Gay Retirement Planning. LGBT Retirement Expert David Rae outlines how love wins for gay couples.

How to Maximize Your Tax Refund – Or Just Blow It?

Maximize Your Tax Refund – Or should you just Blow It? Are you looking to put your tax refund to good use? Here are a few tips to maximize your tax refund, rather than just blowing it. David Rae Financial …

How to Know If You Should Pay Your Taxes with a Credit Card

Tax Season 2021 is here- and that means you may be asking- Should I put my taxes on a credit card? For those of you who love racking up airline miles or earning cash back, paying your taxes on a …

RMD Tips: To Maximize Your Retirement Savings

Financial Planner Shares Tips to Maximize Your Retirement Income by making smart Required Minimum Distribution choices.

6 Simple Ways to Help Reduce Your Tax Fraud Risk

6 ways to reduce your risk of being a victim of tax fraud. This crime is on the rise and can be time consuming and costly.

6 Tax Planning Moves Gay Couples Need To Make Now

LGBT couples face a unique set of Tax Planning Challenges. We share 6 tips to help gay couples lower their taxes before year end.

Getting the Most Money from Your Social Security Benefits

Your Top 4 Social Security Questions Answered, to make sure you are getting the most from your Social Security Benefits. We all want to make sure we are making the most of our Social Security Benefits. For many Americans, their …

Rich People ROTH – For Those With Too Much Income

Do you make too much for a ROTH IRA? The Rich People ROTH may be the answer. For love or money . . . and maybe even a tax break, Cash Value life insurance may be the key to financial …

10 Surefire Ways To Never Become a Millionaire

The Future of Financial Self-Sabotage 10 Surefire Ways to Never Become a Millionaire. When Austin Power’s Dr. Evil set out to extort the world for a million dollars we all cracked up. How quaint, we giggled, when everyone knows that …

Do you know which is best, Tax Deduction or Tax Credit?

The Tax Credit vs. Tax Deduction Quiz Tax season is upon us and while you don’t have to master zillions of pages of the US tax code, it does pay to know a few of the basics. Test your knowledge …

How Donald Trump Lost Billions and Paid No Taxes Nightline Video

Donald Trump turned a billion dollar loss into a way to pay no income taxes for years. Financial Planner LA discusses in this video for Nightline with Nick Watt.

How to Transfer California Property Tax Base from Old Home to New

One of the biggest advantages of owning a home in California is Proposition 13. This limits how much your property taxes can go up each year. Many long-time homeowners are paying property taxes based on an assessed value that is …

Always Avoid the Alternative Minimum Tax : Financial Advice Part 3

Always Avoid the Alternative Minimum Tax: Financial Advice to Break Part 3 Avoiding the alternative minimum tax (AMT) is usually top-of-mind for individuals who receive valuable stock options from their employers. This is especially true when those individuals own substantial …

Recent Posts

6 Tax Strategies To Slash Your 2025 Taxes

The holidays are fast approaching, which means it is time to start doing some year-end tax planning. The Tax Cut and Jobs Act will mean lower tax bills for many Americans. That does not mean you can ignore tax planning. …

VIEW ARTICLE

mega back door roth tax planning strategy so good even dogs love it. — The tax savings can be substantial for those who utilize the Mega BackDoor Roth.

Looking for ways to get more tax-free income in retirement? You should check out the mega backdoor Roth tax-planning strategy. That is assuming you have already maxed out your Roth IRA and 401(k). Making the maximum mega backdoor Roth contribution in 2025 could help triple your contributions in 2025 versus just contributing to a regular Roth 401(k). The mega backdoor Roth allows for nearly 10 times the contribution limits of a regular Roth, depending on your age.

Maximizing your tax-free income in retirement is a great way to avoid outliving your money. Turn your life savings into a paycheck. While the Mega backdoor strategy may not save you a ton of money on taxes today, the lifetime value of this tax planning strategy could be in the hundreds of thousands of dollars, or more, depending on your age and the size of your investments.

By David Rae Certified Financial Planner™, Accredited Investment Fiduciary™

After-Tax Contributions To Your 401(k)

Making after-tax contributions to your 401(k) is different from just making Roth IRA or Roth 401(k) contributions, but the result can be similar if you use the mega backdoor Roth strategy.

For tax year 2025, workers younger than age 50 can contribute $23,500 from their salaries to their 401(k) or Roth 401(k) retirement accounts. Your employer must offer a Roth 401(k) option; luckily, most larger employers do. The contribution limits will increase to $24,500 in 2026.

Some 401(k) plans offer the option to make additional after-tax contributions to your traditional 401(k), which allows you to save well beyond the $23,500 cap. For 2025, you could potentially have $70,000 go into your 401(k)s between your contributions and any employer matching or profit sharing. That number jumps to $77,500 if you are 50 or older. If you are ages 60 to 63, an additional catch-up contribution is available.

Unfortunately, not all workplace retirement plans will allow for after-tax contributions. You could be asking why someone would want to contribute after-tax dollars to their 401(k). Keep reading as we go over some of the benefits of a mega backdoor Roth strategy.

Optimizing Your Mega Backdoor Roth Tax Minimization Strategy

If you can make after-tax contributions to your 401(k), you can then leverage the benefits of the mega backdoor tax-planning strategy to get even more money into your Roth IRA. Remember, you won’t get a tax deduction for these contributions.

Depending on your 401(k) plan’s rules, you can either send your after-tax funds to a Roth 401(k) within the plan or to a separate Roth IRA outside of the 401(k). From there, your assets can grow tax-free and be withdrawn tax-free in retirement.

Mega Backdoor Roth Versus Regular Roth IRA?

If the mega backdoor Roth tax-planning strategy is new to you, I assume you are pondering why go through these extra steps with after-tax contributions. If you are doing a mega backdoor Roth, we assume you have already maxed out your Roth IRA or are above the income limits for contributions. Similarly, you are also already making your full pre-tax or Roth contributions. Again, the mega backdoor Roth allows you to contribute $70,000 into tax-advantaged retirement accounts well beyond the $23,500 cap in 2025 without this strategy.

Once you retire, you can consolidate your Roth 401(k) and Roth IRA into one account and begin enjoying tax-free retirement income.

How Much Money Could You End Up With In A Roth IRA?

Making extra after-tax contributions to your 401(k) can really add up. If you have 25 years to retirement, just $10,000 a year of extra savings can add up to $1 million in Roth 401(k) assets, assuming a 10% return each year. This money can be withdrawn tax-free in retirement.

If you were able to make the full mega backdoor contribution ($54,000) for just 10 years before retirement, you could have an additional $860,000 in retirement. If you contributed this amount for 25 years, you could have over $5.3 million in extra retirement savings that could be withdrawn tax-free.

Keep in mind that these numbers are in addition to your own Roth 401(k) or traditional 401(k) contributions. The numbers are quite staggering when you give compounding interest time to help make you a multi-millionaire.

The finer details of implementing the mega backdoor Roth IRA strategy can trip up some people. Talk with your fiduciary financial planner to avoid the headaches mistakes can cause and ensure you have a plan to build a retirement income plan you won’t outlive while minimizing your lifetime tax bills.

DAVID RAE, CFP®, AIF® is a Los Angeles-based fiduciary retirement planner with DRM Wealth Management. He has been helping friends of the LGBT community reach their financial goals for over a decade. He is a regular contributor to Forbes.com, The Advocate Magazine, and the author of the Financial Planner Los Angeles Blog. Follow him on Facebook or via his website www.davidraefp.com

Financial Planner LA: Where Is The Stock Market Heading? VIDEO

Connect With David Rae, Financial Planner LA

David Rae, CFP® AIF®

President / Founder DRM Wealth Management LLC

1(323) 905-4380

david.rae@financialplannerla.com