Mega is for Side Hustlers

I guess they thought if they used the word "Mega" they would get our attention. And Mega Roth sounds awesome but is rarely explained without a firehose of information. This: it's a tax-free growth opportunity. More people should be using it than we realize, so let's break it down.

Mega Roth is perfect for side-gigs (while it lasts.) One of the best tools out there. Here is how is works: 

Say you work for a company as an employee, make a good salary and max out your 401(k) contributions - nice job! But, you want to save more for retirement. Many people earn extra income on the side.

With that extra income - you can sponsor a 401k plan for yourself - known as an owner only 401k, solo k, uni k and so on - and make a Mega Roth contribution up to 100% of your gig earnings up to $58,000 (for 2021) without any income limitations. Cool, right… 

That's because when you "own" your own business and do not have any employees you can sponsor a 401k plan. Even if you have maxed out a 401k or 403b with your employer, you can still make After-Tax contributions and then covert them into Roth. After-Tax contribution limits are determined per employer and are limited by the following: 

The annual addition compensation limit (100% of compensation)

The annual addition dollar limit ($58,000 for 2021)

And the ACP Test (deemed to pass in owner-only plans) 

After-tax contributions are also very flexible, just make them by the 12/31 (in a calendar year plan) to get credit for them. You can write a personal check or Venmo yourself or whatever. 

This is a tool that should be in every advisors back pocket (not backdoor - back pockets are good…)