You might have read about how anyone could sneak $5,500 a year into a Roth IRA - even if exceeding standard income limitations - through a technique known as the backdoor Roth IRA. But did you know there is an even trickier technique out there that allows some lucky people to contribute up to $36,000 a year into a Roth IRA? Given the larger size and to differentiate it from the typical backdoor Roth IRA, some have started calling this technique the "mega backdoor Roth IRA.”
A Roth IRA is the ultimate retirement vehicle, as it allows you to contribute post-tax dollars to a retirement account. That means a Roth IRA grows tax-free and is withdrawn tax-free since you've paid taxes on the money upfront. That sounds like a good deal - unless you bump up against income barriers. If you make too much money, you might find yourself blocked from contributing to a Roth IRA - that is, unless you go through the backdoor.
Retirement plans have long been used by employers to attract new talent. For years, defined benefit plans (i.e. pension plans) were in vogue. These plans were great for employees, because they offered them a guaranteed monthly payment at retirement - the payment was typically determined by a combination of your average or final salary, years of service with the company, and age. Because the pension payment was based on a set formula rather than market or investment performance, savers had the luxury of taking a more passive role in their retirement planning.