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Amazon Mega Backdoor Roth 2022 - Save Thousands To a Roth! - YouTube
Channel: Avier Wealth Advisors
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- Amazon employees let
me show you how in 2022,
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you can save $37,300 into a Roth
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using the Mega Backdoor Roth
conversion available to you
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within the Amazon 401k plan.
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I'm just gonna jump right into it here.
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In this example,
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we're gonna look at somebody who is making
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the Amazon max based salary
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outside of the New York
and Bay area of $160,000,
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who is under 50 years old.
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So we know that you can
save $20,500 into a 401k
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on a pretax basis in 2022.
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Amazon is gonna match
2% of your base salary.
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So in this case, $3,200 bucks,
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and then also we know that
there is this federal maximum
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for total dollars going into a 401k,
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which in 2022 is $61,000.
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Now it used to be the case
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that Amazon would allow
you on an after tax basis
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to contribute 10% of your base salary
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to the after tax portion of your 401k.
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Until an email went out
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to Amazon employees in early 2022,
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and it said,
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and this is really the
key component right here.
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The after-tax contribution
limit of 10% has been removed.
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You can now save up to the
federal limit within the 401k.
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So what does this mean?
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It used to be the case
that you could save again,
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call it $16,000
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and convert those dollars
to Roth automatically.
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But now with this change,
you can max this bucket out.
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You can fill the thing up.
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So in this case, you do the quick math,
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that's $37,300 that you can
put into this after tax bucket.
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This is a big, big deal.
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These are dollars that
are gonna grow tax-free,
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you're not gonna pay taxes
on any interest income,
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dividends, capital gains,
anything like that ever.
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This is a big deal.
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So how do you actually make this happen?
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And how do we think about this
in the context of your plan?
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Well, you go to Fidelity Net Benefits.
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You go to contributions
within your Amazon 401k plan.
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And the first thing that you'll see here
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is just this pre-tax section.
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So again, you're gonna wanna make sure
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that you are maxing this section out.
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This is that $20,500 number.
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Then we see the after-tax section.
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Again, we used to be limited
to 10% of base salary.
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Now you can go anywhere from
zero to 90% of your salary
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into this bucket.
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This is that $37,300 that we
were just looking at earlier.
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And then, and this is super important.
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You've got this other contributions.
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Let me make sure that I'm
not getting in the way here,
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Roth in plan conversion,
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and you have a couple of options here.
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You've got don't convert after tax to Roth
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and then convert after tax to Roth.
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Now, every situation is different,
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but if you're watching this video,
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you almost certainly want
to convert after tax to Roth
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because that's what's gonna
allow these after tax dollars
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to turn into Roth dollars
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that are gonna grow tax-free forever.
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Now, at this point, I
could sit up here and say,
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Hey, if you're liking this
video, if you find this helpful,
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please like and subscribe to our content
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and don't get me wrong
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that would really help right.
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More than that though, what I would love
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is if you could share this
with your Amazon colleagues,
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because I think that there's
a lot of Amazon employees
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out there have their
financial house in order,
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they're making good money,
but they're so busy,
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that some random email that
comes across on a Tuesday
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in early January that says,
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a little update to your 401k, okay.
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Move to the archives delete it.
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I got stuff I need to do.
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I got to move on with my life.
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No this is a really, really big deal.
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If you used to be able to
save $16,000 into this bucket
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of tax-free dollars
forever from here on out,
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and now you can save over
$20,000 more than that,
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call it 37,000 plus per year.
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This is a really big deal.
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So don't get me wrong.
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Liking and subscribing helps,
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but I would encourage you
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if you can, to share this
with your colleagues.
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Moving on here, we see that
when we do make a contribution,
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we cannot say a certain dollar amount
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that we wanna contribute.
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We do have to say a percentage.
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And so what I've done,
I've created a little,
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Amazon max out calculator
right here, a few caveats.
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One, this assumes that
these changes are made
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at the start of the year so
that we have 12 full months.
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But then on top of that,
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the other big takeaway
here in my eyes is that
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you wanna make sure that you
take whatever percentage it is
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that allows you to max these buckets out
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and then round those up
to the nearest percentage,
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just to make sure
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that you're not leaving
any money on the table.
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So if 12.8% max is out your
401k, call it a 13% contribution
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and move on with your life, right.
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A few other caveats here.
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When we think about
these after tax dollars,
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the Mega Backdoor Roth,
these are long-term dollars.
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So these are not dollars
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that you're saving for a
down payment on a home,
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or these are not dollars
that you're saving
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to contribute to the kid's college fund
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or anything along those lines.
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These are truly long-term dollars.
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On top of that from a
cashflow perspective,
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how do you make this work?
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I don't wanna make light of the fact that
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if you are maxing out your 401k
and your Mega Backdoor Roth,
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that's $57,800, that you are not receiving
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as a part of your paycheck.
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Instead, those dollars
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are being diverted into
these other buckets.
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So, I don't wanna make light of the fact
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that that's a lot of money.
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And so, you don't have to
max these benefits out.
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It's not an all or nothing type of thing.
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You could say,
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I wanna contribute $30,000
to the after-tax bucket.
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I wanna contribute 20,000, 10,000.
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Shot you can say, I want
to throw a $1,000 bucks
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in the Mega Backdoor Roth.
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And that's a huge, positive, right
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Anything that you can do
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to save additional dollars in
these buckets is a positive.
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And then secondly,
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what is the context within
your financial plan?
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A lot of Amazon employees,
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a lot of folks who are
watching this right now,
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you have what I like to call
a treadmill of Amazon stock
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coming at you with these RSUs
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that are just being delivered,
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on a fairly frequent basis, right.
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And so with that in mind, what
are things that you can do
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from a financial planning perspective,
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including perhaps selling
those RSUs when they vest,
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living off of those dollars,
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to allow yourself to
divert additional dollars
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from your base salary,
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into these other tax advantage buckets
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that we're talking about.
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So again, this is an
absolutely incredible benefit.
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I would encourage you
to take advantage of it
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to the extent that you can.
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If you have any questions,
please feel free.
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Reach out I promise
that I'm a real person.
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If you do have questions, I am here.
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I wanna be a resource.
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Our entire team knows Amazon
benefits inside and out.
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I will include just very
quickly my contact information
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on this next page.
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Feel free add me on LinkedIn.
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If you add me, might take me
a moment to get back to you,
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but I promise I'm a real person.
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So there's contact information.
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Let us know if we can
be a resource for you.
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Here are the requisite
disclaimers right up here.
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Please feel free, like subscribe,
share with a colleague,
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let us know how we can help, cheers .
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