Mega Backdoor Roth and Roth Conversions for High Earners: The Complete Strategy Guide

If your income is above the Roth IRA limit, you are probably leaving a quiet but expensive door closed. Every year that your investment growth sits in a taxable or tax-deferred account, it is exposed to future tax rates you do not control, and for a high earner the cumulative tax difference over a few decades can be substantial. Most people in this position hear "you earn too much for a Roth" and stop there. That conclusion is only true for one specific kind of Roth contribution. A mega backdoor roth and a Roth conversion are two separate, fully documented routes that have no income limit at all.

This guide is the hub for that topic. You will learn how a tax-free investing strategy works when direct Roth contributions are off the table, what a mega backdoor Roth is, how it differs from a standard backdoor Roth, why the pro-rata rule decides whether a conversion is clean or costly, and how a business owner can run the entire strategy through a Solo 401(k) with after-tax contributions and an in-plan conversion. We also cover what changes when your Roth dollars sit inside a self-directed account that holds alternative assets.

Everything here uses the 2026 figures published by the IRS, and every number in the examples is arithmetic you can check yourself. This is education, not personalized advice. Your tax, legal and financial professionals should confirm how each piece applies to your facts before you move a dollar.

What Is a Mega Backdoor Roth?

A mega backdoor Roth is a strategy that lets you put far more money into Roth status each year than the standard Roth limits allow, by making after-tax contributions to an employer plan such as a 401(k) and then converting those dollars to Roth. "After-tax" here means contributions you make with money that has already been taxed, which are separate from both your pre-tax deferrals and your Roth deferrals. The conversion step moves those dollars, along with any growth, into a Roth account where future qualified withdrawals can be tax-free.

If you searched for "what is a mega backdoor roth," the short version is a three-part sequence. First, your plan must allow after-tax contributions beyond the normal employee deferral limit. Second, you contribute up to the total plan limit, which for 2026 is $72,000 under Internal Revenue Code Section 415(c) according to IRS Notice 2025-67. Third, the plan lets you convert those after-tax dollars to Roth, either inside the plan (an in-plan Roth conversion) or by moving them out to a Roth IRA (an in-service rollover). The Journal of Accountancy describes the same four ingredients: a plan that accepts after-tax contributions, a Roth option, and either in-plan conversions or in-service withdrawals.

The plain-language mechanics

Your plan has a single total ceiling for the year. Your deferrals and any employer contribution use part of it, and a mega backdoor Roth fills the remaining room and then converts it. The IRS has issued guidance on how after-tax and pre-tax amounts are treated when they leave a plan, and the strategy sits on top of that guidance. It uses space the law already gives you.

Why it is called "mega"

The standard backdoor Roth is limited by the IRA contribution limit, which is $7,500 for 2026, or $8,600 if you are 50 or older, per the IRS announcement IR-2025-111. The mega version is limited by the plan ceiling instead. Depending on how much you defer and how much your business contributes, the after-tax space can be several times larger than the IRA limit. That difference in scale is the whole reason for the name.

One note on terminology. You will see "mega backdoor roth ira" used often, and it is a slightly loose label. The strategy starts in a 401(k) plan, not an IRA. A Roth IRA can be the destination if you roll the converted dollars out, but a Roth account inside the plan can be the destination too. The next sections separate those paths so you can see which one fits your situation.

Roth Conversions: How They Work for High Earners

A Roth conversion moves money from a pre-tax retirement account, such as a traditional IRA or a pre-tax 401(k) balance, into a Roth account. You pay ordinary income tax on the pre-tax portion in the year of the conversion, and in exchange the converted dollars and their future growth are positioned for tax-free qualified withdrawals. Because a roth conversion is a rollover-type transaction rather than a contribution, it is not subject to the Roth IRA income limits. IRS Publication 590-B confirms that conversions have no income restriction, and it is the reason both strategies in this guide are open to you at any income level.

What gets taxed, and when

The taxable amount of a conversion is the pre-tax portion you move. If you convert $50,000 of pre-tax IRA money, the full $50,000 is added to your income for that year. If part of what you convert is after-tax basis (money you already paid tax on), that part is not taxed again. Which part is which is determined by the pro-rata rule, covered in detail below. The practical takeaway is that a conversion is a tax decision as much as an investment decision, and the year you do it matters.

Some high earners convert in a year when income is temporarily lower, and others spread conversions across several years. Neither approach is right for everyone, so have your CPA model the tax effect, including any interaction with other income-based thresholds, before you commit.

No income limit, and no undo button

Two facts about conversions are worth stating plainly. First, there is no income cap. Second, a conversion cannot be reversed. The IRS retirement FAQ states that as of January 1, 2018, a conversion to a Roth IRA cannot be recharacterized, which means you cannot convert, watch the market fall, and then undo the conversion to cancel the tax. Once the tax is owed, it is owed. That permanence is why many people convert in measured amounts.

The five-year rules

Roth accounts carry timing rules that are easy to miss. For a Roth IRA, a distribution is generally a qualified, tax-free distribution only after a five-year period has passed and you meet a triggering condition such as reaching age 59½. Separately, each conversion has its own five-year clock for purposes of the 10 percent additional tax on early distributions. Publication 590-B explains that the conversion clock starts on January 1 of the year of the conversion and runs separately for each conversion. If you are under 59½, track each conversion by year.

Why Roth status is worth the effort

The IRS notes that you can leave money in a Roth IRA for as long as you live, because the original owner has no required minimum distributions from it, according to the IRS Roth IRA overview. No one can promise growth, and every investment carries risk, but the tax treatment of whatever growth occurs is something you can influence today.

Backdoor Roth vs Mega Backdoor Roth

The two strategies sound similar and are often confused, so this is the comparison that matters most when you are deciding what to do. A mega backdoor roth vs backdoor roth decision comes down to where the money goes first, how much room you have, and what other balances you hold.

How the standard backdoor works

With a backdoor Roth, you make a nondeductible contribution to a traditional IRA and then convert it to a Roth IRA. You use this route because your income is too high to contribute to a Roth IRA directly. The 2026 phase-out range is $153,000 to $168,000 for single filers and $242,000 to $252,000 for married couples filing jointly, with a $0 to $10,000 range for married filing separately, per IR-2025-111. A single filer with income of $200,000 is above the range, so a direct Roth IRA contribution is not allowed, but the nondeductible contribution followed by a conversion remains available. You can read more about how IRA contributions work in our learning center.

How the mega version differs

The mega backdoor roth uses the plan ceiling, not the IRA ceiling, so the capacity is larger, and it works inside an employer plan, so the IRA pro-rata calculation is generally not the obstacle. The tradeoff is that your plan has to be built for it. Many employer plans do not offer after-tax contributions or in-plan conversions, but a business owner can often choose a plan that does. Our guide to the Solo 401(k) in full walks through the plan design behind it.

Which one fits you

If you are an employee with a standard workplace plan that does not support after-tax contributions, the backdoor Roth may be your only option, and managing the pro-rata rule is your main task. If you are a business owner with no employees other than a spouse, a Solo 401(k) that supports the mega version gives you far more capacity. Couples sometimes use both, and the spousal IRA strategies article explains how to coordinate that.

The Pro-Rata Rule: Where Backdoor Strategies Go Wrong

The mega backdoor roth pro rata rule question usually starts with a simple misunderstanding: people assume the rule applies to the mega version the same way it does to the IRA backdoor. It does not work quite the same way, and understanding why requires seeing how the rule works first. The pro-rata rule says that when you convert or withdraw from your traditional IRAs, you cannot choose to convert only the after-tax dollars. Instead, every dollar you move is treated as a proportional mix of pre-tax and after-tax money drawn from all of your traditional IRAs combined.

What the IRS instructions say

The Instructions for Form 8606 require you to report the total value of all your traditional IRAs as of December 31, and they state that traditional IRAs generally include traditional SEP IRAs and traditional SIMPLE IRAs. A SEP IRA from an old side business counts in the same pool as your personal IRA. The instructions also tell you to keep track of your basis, the after-tax money in your IRAs, because that basis is what determines the nontaxable part of future distributions. Employer plan balances, such as a 401(k), do not go into that IRA calculation.

A worked example

Suppose you are single, earn $200,000, and have $92,500 of pre-tax money in a rollover IRA. You make a $7,500 nondeductible contribution to a traditional IRA, and you plan to convert it right away. Your total IRA value is $92,500 plus $7,500, or $100,000, and your after-tax basis is $7,500, which is 7.5 percent. When you convert $7,500, only 7.5 percent of it, or $562.50, is nontaxable. The other $6,937.50 is taxable as ordinary income. The $92,500 does not stay put while you convert the new dollars. The rule treats the conversion as a slice of the whole.

Now change one fact. Suppose the $92,500 is not in an IRA but in your former employer's 401(k) or in your own Solo 401(k). At year-end your traditional IRAs hold only the $7,500 nondeductible contribution. The basis is 100 percent, and converting $7,500 triggers no tax on the principal, only on any growth before the conversion. The same dollars, in a different type of account, produce a very different result. That is the entire pro-rata story in two examples.

How the pro-rata rule interacts with a mega backdoor

When you do a mega backdoor Roth entirely inside a plan, the converted dollars never touch your IRAs, so the IRA pro-rata calculation is generally not part of that conversion. A different allocation rule applies when you take a distribution out of the plan, though. IRS Notice 2014-54 says that all disbursements scheduled at the same time are treated as a single distribution, and that the pre-tax amount is allocated first to direct rollovers. Your plan administrator and CPA should confirm how the plan handles the allocation.

Ways to manage the pro-rata problem

If a large pre-tax IRA balance is blocking your backdoor Roth, there are a few ways people deal with it, each with a tradeoff. You can roll the pre-tax IRA balance into an employer plan or Solo 401(k) that accepts incoming rollovers, which removes it from the IRA pool. The Form 8606 instructions specifically say not to include an outstanding rollover from a traditional IRA to a qualified retirement plan in the year-end value, which is the mechanism behind this approach. You can also convert the pre-tax balance on purpose and accept the tax in a year you choose. Or you can skip the IRA backdoor and use the plan-based mega route. Our guide to the IRA rollover process covers how those transfers are handled, and the plan side is explained in the combining a Solo 401(k) and self-directed IRA overview.

2026 Limits and the Mega Backdoor Roth Limit Formula

The mega backdoor roth limit 2026 is not one fixed number, because it depends on what else you put into the plan. The cleanest way to see it is to start with the verified 2026 figures from Notice 2025-67 and IR-2025-111.

The formula

The mega backdoor roth limit, meaning the amount available for after-tax contributions, follows one subtraction. Take the $72,000 total limit, subtract your own deferrals (pre-tax or Roth), and subtract any employer contributions (profit sharing or matching). The remainder is your after-tax space. Catch-up contributions are added on top and do not reduce it. The Journal of Accountancy lays out the same logic: the maximum after-tax contribution is the annual limit minus the sum of employee deferrals and employer contributions, and its figures show the 50-plus total running higher than the under-50 total by the catch-up amount.

Written out, it looks like this: after-tax space equals $72,000 minus employee deferrals minus employer contributions. Separately, the total of your deferrals, employer contributions and after-tax contributions cannot exceed 100 percent of your compensation. Section 415(c) of the code sets that second limit, and for a self-employed person the compensation figure is earned income as defined in the statute. In other words, the actual limit is whichever of the two constraints is lower.

Scenario 1: age 42, business owner with high net earnings

You defer the full $24,500. Your business contributes $30,000 as an employer contribution, calculated on the worksheets in IRS Publication 560 and treated here as an assumed figure. The arithmetic is $72,000 minus $24,500 minus $30,000, which equals $17,500 of after-tax space. If you contribute the full $17,500 and convert it, your total contributions are $24,500 plus $30,000 plus $17,500, or $72,000, and $17,500 of that moves into Roth status through the conversion (plus the $24,500 if you elected Roth deferrals).

Scenario 2: age 54, S corporation owner paying $180,000 in W-2 wages

Your employer contribution can be up to 25 percent of W-2 compensation, per the IRS one-participant 401(k) guidance, which is $45,000 at that salary. If you defer $24,500 and take the full $45,000 employer contribution, the total is $69,500, leaving $72,000 minus $69,500, or $2,500 of after-tax space. The age-50 catch-up of $8,000 goes on top, so the year's total is $69,500 plus $2,500 plus $8,000, or $80,000.

Now suppose you decide you would rather have more Roth capacity and less deduction. You cut the employer contribution to $15,000. The after-tax space becomes $72,000 minus $24,500 minus $15,000, or $32,500, and the total stays $72,000 plus the $8,000 catch-up, or $80,000. The difference is the tax character of $30,000: it moves from a deductible employer contribution to after-tax dollars that you convert to Roth. This is the central tradeoff in the strategy, and it is a tax decision to make with your CPA, not a default.

Scenario 3: the compensation cap bites

You own an S corporation and pay yourself $60,000 in W-2 wages. The employer contribution at 25 percent is $15,000, and you defer $24,500. The dollar-limit math says $72,000 minus $24,500 minus $15,000, or $32,500. But total contributions cannot exceed 100 percent of compensation, which is $60,000, so the real ceiling is $60,000 minus $24,500 minus $15,000, or $20,500. The lower figure controls. The lesson is that a modest salary or low net self-employment income can cap the strategy long before the $72,000 limit does.

Ages 60 to 63 and the compensation limit

If you are between 60 and 63, the catch-up allowance for 2026 is $11,250 instead of $8,000, again per IR-2025-111. It sits on top of the $72,000 limit, so it does not shrink your after-tax space. The $360,000 compensation limit in Section 401(a)(17) caps the pay counted for employer contributions, but 25 percent of $360,000 is $90,000, which exceeds the $72,000 total limit, so at that level the dollar ceiling usually binds first.

Mega Backdoor Roth Solo 401(k): How It Works Step by Step

A mega backdoor roth solo 401k is the same strategy applied to a plan covering a business owner with no employees other than a spouse, which is how the IRS describes a one-participant 401(k). The owner is both the employee and the employer, so you control the contribution mix directly. That control is what makes the Solo 401(k) one of the most flexible vehicles for the strategy. We cover the broader plan in our Solo 401(k) learning page and the complete Solo 401(k) guide, so this section focuses only on the mega mechanics. For a first look at how the plan compares to a SEP, see the Solo 401(k) vs SEP IRA comparison.

The plan document has to allow it

This is the point that trips up most people. A Solo 401(k) will not do a mega backdoor Roth just because it is a Solo 401(k). The plan document must allow two features: after-tax (non-Roth) employee contributions, and either an in-plan Roth conversion or an in-service rollover of those after-tax amounts to a Roth IRA. Many off-the-shelf and basic plans do not include one or both features. The IRS has explained that in-plan Roth rollovers of eligible amounts do not depend on a distribution event, in Notice 2013-74, but your plan still has to adopt the option. Ask for the plan document language before you rely on it.

The sequence

1. Confirm the plan features. Your plan document should permit after-tax employee contributions and an in-plan Roth conversion or in-service rollover.

2. Estimate your compensation. For an S corporation owner, that is W-2 wages. For a sole proprietor or partner, it is net earnings from self-employment as defined in the Publication 560 worksheets.

3. Choose your deferrals. Decide how much of the $24,500 to contribute, and whether it goes in pre-tax or as a Roth deferral.

4. Choose the employer contribution. Remember the tradeoff from Scenario 2: every dollar of employer contribution reduces after-tax space by a dollar.

5. Calculate the after-tax space. Subtract deferrals and employer contributions from $72,000, then apply the 100 percent of compensation test.

6. Make the after-tax contribution. Keep the account records clear so the after-tax amount is identified as basis.

7. Convert promptly. Move the after-tax dollars and any earnings to the Roth account or Roth IRA according to the plan's procedure.

8. Document and file. Keep the conversion records for your CPA. If your plan has $250,000 or more in assets at year-end, a Form 5500-EZ is generally required, per the IRS one-participant plan page.

Why timing matters

After-tax dollars are not taxed again when you convert them, but earnings on those dollars are taxable when you convert. If you contribute $17,500 and convert after it grows to $17,640, the $140 of growth is taxable in the conversion year. That figure is a pure illustration, not a prediction. The shorter the gap between contribution and conversion, the smaller that tax is.

In-plan conversion vs in-service rollover

With an in-plan Roth conversion, the converted money stays in the plan inside a designated Roth account. With an in-service rollover to a Roth IRA, the money leaves the plan and lands in a Roth IRA that you control. Notice 2014-54 matters here because it governs how pre-tax and after-tax amounts are allocated when a distribution is split among destinations. The IRA route can offer broader investment flexibility, while the in-plan route is simpler to administer. If your Roth IRA is the destination, you may hear it called a "mega backdoor roth ira," but the strategy still began in the 401(k).

What changes if you add employees

The cleanest version of this strategy depends on having no eligible employees besides yourself and a spouse. Once you hire staff who are eligible for the plan, the plan may no longer qualify as a one-participant plan, and nondiscrimination testing can enter the picture for after-tax contributions, with the $160,000 highly compensated employee threshold being one of the definitions that comes into play. If you expect to hire, ask your plan administrator and ERISA counsel how that would affect the design before you build a strategy around after-tax dollars.

Self-employment nuances

For sole proprietors, net earnings are reduced by half of your self-employment tax and by the plan contribution itself, which is why the IRS provides worksheets in Publication 560. The after-tax contribution is limited by those net earnings under the Section 415(c) compensation definition, so your real space may be lower than the headline formula. Have your CPA or plan administrator run the worksheet first.

Roth Inside a Self-Directed Account

Roth status and alternative assets are a natural pairing, but they come with additional rules. A Roth IRA or a Roth account in a Solo 401(k) can usually be held in a self-directed structure, where the account owner chooses investments beyond publicly traded securities, such as private lending, real estate, private company interests or precious metals. Our overview of increasing your investment options and the alternative investments in a self-directed IRA article explain the menu.

The rules still apply

Self-directed does not mean unregulated. The IRS states that retirement plan investments cannot involve prohibited transactions, defined as transactions between a plan and a disqualified person, including sales, leases, loans, and the use of plan assets for a fiduciary's personal benefit, per the IRS retirement plan investments FAQ. The IRS also states that IRA funds cannot be invested in life insurance or collectibles, and that unconventional assets carry a risk of disqualifying the IRA if they involve self-dealing. Read the self-directed IRA rules before you buy anything, and see how an IRA compares to a plan in self-directed vs regular IRAs.

Unrelated business income

Some investments held in a retirement account can generate unrelated business taxable income, which is taxed even inside the account. The Instructions for Form 990-T say trustees of IRAs, including Roth IRAs, must file when the account has $1,000 or more of unrelated trade or business gross income. An operating business or leveraged investment held in a Roth should be reviewed by your CPA first.

Fitting Roth dollars into your investment plan

High-growth or higher-risk assets, if you choose them, are often placed in the Roth bucket because the tax treatment of gains is the most favorable there, while income-oriented holdings may sit in pre-tax accounts. That is an allocation question, not a promise of results, and it carries real risk including loss of principal. If you invest in private deals, our guides on how to invest in private equity and how to invest in private lending show how those assets are held in a retirement account. If real estate interests you, the self-directed IRA real estate guide and the private equity article go into more detail.

Where an administrator fits

Unified Wealth Systems is a done-for-you concierge administrator. We help you set up and administer the structures, and we do not hold your assets, give personalized investment advice, or replace your CPA or attorney. Your assets are held by the appropriate custodian or by your plan trustee, depending on the structure. See lower transaction and annual holding fees for how the cost side works.

Putting the Pieces Together: A Sample Sequence

Strategies make more sense in order. Here is one illustrative sequence for a high earner who owns a business with no employees. It shows how the pieces connect and is not a recommendation.

1. Clear the IRA pool. If you hold a pre-tax IRA balance, decide whether to roll it into the Solo 401(k) or convert it on a planned schedule. The IRA rollover page explains how transfers work.

2. Confirm the plan. Make sure the plan document supports after-tax contributions and conversion. Some owners pair a Solo 401(k) with a self-directed IRA, as described in combining a Solo 401(k) and SDIRA.

3. Decide the mix. In Scenario 2, shifting $30,000 from an employer contribution to after-tax space changed the tax character without changing the total. That choice depends on the value of your deduction today versus tax-free growth later.

4. Fund and convert. Make the after-tax contribution, then convert it promptly to limit taxable earnings.

5. Check the entity and tax side. An S corporation relies on W-2 wages and a sole proprietorship on net earnings. Read about entity structures and choosing the right structure, and coordinate with a professional through tax preparation services. A sound entity formation setup can matter as much as the plan.

6. Plan the estate. Roth balances are often a legacy asset. See the estate planning for business owners article, the estate planning services and our asset protection overview. Creditor protection for retirement accounts varies by account type and by state, so confirm with an attorney how the rules apply to you.

Questions to Bring to Your CPA and Plan Administrator

Ask your CPA how a conversion this year affects your total tax and whether smaller conversions over several years would serve you better. Ask your plan administrator whether your plan document includes after-tax contributions and in-plan conversion. For broader tax ideas, see our tax optimization strategies article and learning how to pay less taxes. The HSA retirement strategy guide shows a complementary account, and the complete guide to self-directed IRAs, the Solo 401(k) guide for physicians and the checkbook control IRA article add background. The glossary defines the terms used here, and the learning center holds the full library.

Frequently Asked Questions

What is a mega backdoor Roth in simple terms?

A mega backdoor Roth is a way to contribute after-tax money to a 401(k) beyond your normal deferral limit and then convert it to Roth. The total that can go into the plan in 2026 is $72,000 before catch-up contributions, so the after-tax portion is whatever remains after your deferrals and any employer contributions. The plan document must allow both steps, so confirm that with your plan administrator.

What is the mega backdoor Roth limit for 2026?

There is no single mega backdoor Roth limit, because the amount depends on your other contributions. The formula is $72,000 minus your employee deferrals minus employer contributions, with catch-up contributions added on top and the whole total capped at 100 percent of your compensation. For example, if you defer $24,500 and your business contributes $30,000, your after-tax space is $17,500. A small salary can hit the compensation cap first.

How does a Roth conversion differ from a mega backdoor Roth?

A Roth conversion moves existing pre-tax money into a Roth account and taxes it in the conversion year, while a mega backdoor Roth first adds new after-tax contributions and then converts them. The conversion has no income limit in either case. In a pure conversion, you pay ordinary income tax on the pre-tax amount you move. In the mega version, the after-tax contributions are already taxed, so the tax at conversion is generally limited to any earnings that built up before the conversion.

What is the difference between a backdoor Roth and a mega backdoor Roth?

The backdoor Roth runs through a traditional IRA and is capped at the IRA limit of $7,500 for 2026, or $8,600 if you are 50 or older. The mega backdoor Roth runs through an employer plan and is capped by the plan limit minus your other contributions, which can be many times larger. The backdoor is subject to the pro-rata rule across your IRAs, while the in-plan mega route generally is not.

Does the pro-rata rule apply to a mega backdoor Roth?

The IRA pro-rata rule generally does not apply to an in-plan mega backdoor conversion, because those dollars never go through your IRAs. The Form 8606 instructions limit the pro-rata calculation to your traditional, SEP and SIMPLE IRAs, and they exclude employer plan balances. A separate allocation rule applies when you take a distribution from the plan: Notice 2014-54 treats simultaneous distributions as one and directs pre-tax amounts to rollovers first.

Can I do a mega backdoor Roth with a Solo 401(k)?

Yes, if your Solo 401(k) plan document permits after-tax contributions and an in-plan Roth conversion or in-service rollover. Many standard plans do not include these features, so you may need a plan built for them, and your compensation or net earnings can reduce your space.

Is the mega backdoor Roth still allowed in 2026?

As of the 2026 limits published by the IRS, the strategy is available to those whose plans support it, and the total plan limit rose to $72,000. The IRS has issued guidance, including Notice 2014-54 and Notice 2013-74, that addresses how after-tax and pre-tax amounts and in-plan Roth rollovers are treated. Tax law can change, so confirm the current rules with your tax professional before you contribute.

Is there an income limit for Roth conversions?

No, there is no income limit for Roth conversions. Publication 590-B confirms that conversions have no income restriction, which is why a high earner who cannot contribute directly to a Roth IRA can still convert. The limit applies to direct Roth IRA contributions, which phase out between $153,000 and $168,000 for single filers and between $242,000 and $252,000 for joint filers in 2026.

Can I undo a Roth conversion if the market drops?

No, a Roth conversion cannot be undone. The IRS states that conversions from a traditional IRA, SEP or SIMPLE to a Roth IRA cannot be recharacterized after January 1, 2018. That means you cannot reverse a conversion to cancel the tax if your investments lose value afterward. Many people therefore convert in stages.

How long do I have to wait to withdraw converted money?

If you are under 59½, converted amounts withdrawn within five years of the conversion can be hit with the 10 percent early distribution tax, and each conversion has its own clock that starts January 1 of the conversion year. Qualified distributions of earnings from a Roth IRA generally require both the five-year period and a triggering event such as age 59½. The rules for a Roth account inside a 401(k) can differ, so confirm the plan's treatment.

Can I hold alternative investments in a Roth account?

Yes, a self-directed Roth IRA or Roth account in a Solo 401(k) can generally hold alternative assets, as long as you follow the prohibited transaction rules. The IRS says transactions between the plan and a disqualified person, such as sales, loans or leases, are prohibited, and it notes that life insurance and collectibles cannot be held in an IRA. Unrelated business income can also create a tax inside the account when it reaches $1,000 of gross unrelated income.

What does Unified Wealth Systems do in this process?

Unified Wealth Systems is a done-for-you concierge administrator, which means we help you set up and administer self-directed retirement structures such as a Solo 401(k) or self-directed IRA. We are not a custodian, a law firm, a CPA firm or a licensed advisor, so we do not hold your assets or give personalized tax or investment advice. Your CPA models the conversion, your attorney reviews the legal side, and we help with the structure and administration. See our Solo 401(k) and self-directed IRA services.

Ready to take control of your retirement?

High earners do not have to accept a ceiling on Roth savings. With the right plan document, a clear formula and a tax plan that fits your situation, a mega backdoor Roth and well-timed conversions can become part of a long-term strategy that you control. If you want help putting the structure in place, we handle the administration while your CPA and attorney handle the advice.

→ Schedule Free Consultation

→ Get Started

Related Reading: Solo 401(k) Complete Guide | The Complete Guide to Self-Directed IRAs | Tax Optimization Strategies for High-Income Professionals