Amazon Mega Backdoor Roth 2020 - YouTube

- Okay, Amazon employees,

this is a video that I've been hoping to make for you guys

for a number of years.

You guys finally, as of early 2020, have access

to the Mega Backdoor Roth Conversion, AKA the

after-tax contribution to your 401k plan.

This was not eligible for Amazon employees

until you guys switch from Vanguard to Fidelity

at the very start of 2020.

And now you guys are eligible to take advantage

of the Mega Backdoor Roth Conversion.

So, let's jump into the numbers.

Let's talk a little bit about what this means

and why this might be important for you.

And why, in my opinion,

you should take full advantage of this if you can.

You probably know that within your 401k

you can contribute, if you're under 50,

$19,500 per year.

If you're over 50,

you can contribute an extra $6,500.

We're just gonna concentrate on folks

who are under 50 right now for this example.

So if you max out your 401k contribution, again

you can put in $19,500.

Now, we love Amazon, we think it's a great company,

we think you guys have some pretty good benefits.

The 401k match associated with Amazon

is not the best in the industry.

But if you contribute up to 4% of your salary,

they're gonna contribute 2%.

So they're gonna give you 50% of that match up to 4%.

In this sort of a scenario,

if you are contributing the maximum to your 401k,

they're gonna put in 2% of your salary.

So let's just say

that you're making the max Amazon base salary,

you're making $160,000 a year.

Essentially, you can put in $19,500,

Amazon is gonna to put in 2%.

So they're gonna give you $3,200 as a match within your 401k.

Now what you probably don't know though,

is that the federal limit for total dollars going

into a 401k in any given year is $57,000 as of 2020.

Where the Mega Backdoor Roth comes into play here,

is essentially Amazon is gonna allow you to contribute up

to 10% of your base salary to the after-tax portion

of your 401k.

And so again,

if you're making $160,000 base,

then that means Amazon is gonna let you put in essentially

$16,000 over the course of the year.

Now, that doesn't mean technically actually,

that you can put in $16,000 no matter when you start.

They're gonna let you put in up to 10%

of your salary each respective paycheck.

So, for those of you that wanna take advantage of this,

for those of you that think,

'boy, this is a benefit that is off the charts

that I really should be taken advantage of'

the sooner the year that you start taking advantage of this,

the sooner in the year that you do make

that election within Fidelity

to make a after-tax contribution to your 401k the better.

The reason that this is important is because

if you're gonna save money above and beyond your 401k,

you're probably gonna save money into a brokerage account.

So think like an individual account,

a joint with rights of survivorship account,

a trust, an account like that.

These types of accounts,

you get taxed each and every year.

So, when we think of dividends

when we think of interest income,

when we think of capital gains,

each and every one of these pieces

is gonna be taxable each and every year.

And when you think about that sort of tax drag,

particularly over a long time frame,

it tends to really, really add up.

If on the other hand,

you immediately convert these dollars to Roth,

now you've got these dollars sitting in a bucket

where any interest income, any dividends, any capital gains,

that's all tax free.

If you guys wanna talk,

I'm more than happy,

feel free, add me on LinkedIn,

I'm pretty easy to get ahold of.

We make a lot of videos as they specifically relate

to Pacific Northwest companies

and the Mega Backdoor Roth Conversion.

For some of you,

you're just gonna wanna say,

'hey, I just wanna do this on my own.'

For those of you that might want a little bit more help,

we are a Registered Investment Advisory firm.

This is just the tip of the iceberg for the things

that we help people with,

particularly as they relate

to the Mega Backdoor Roth Conversion,

ESPP, RSU's,

grants, options,

all of these kind of things.

So again, feel free,

find me on LinkedIn.

Shoot me a quick add or I guess in this image

I think LinkedIn might be over there.

I can't exactly tell but,

anyway to my side you can see my LinkedIn.

Feel free to add me.

If you have any questions, reach out.

We'd love to hear from you, cheers.