Updated for 2022!

Intel employees can invest more towards retirement using the Intel Mega Backdoor Roth Conversion, also known as the after-tax Roth conversion within your 401(k) plan.

In this video, we explain what this benefit is and how it can help you invest more towards your retirement while reducing some of your future tax liabilities.

The Numbers Behind the Intel Mega Backdoor Roth Conversion

You probably know that within your Intel 401(k) you can contribute up to $20,500 per year if you’re under 50, and an extra $6,500 per year if you’re over 50. You must be contributing the maximum amount to your 401(k) to take advantage of the Mega Backdoor Roth.

Let’s walk thru an example of someone who is under 50 years old, making $200,000 and contributing the maximum to their 401(k) – $20,500.  The Intel employer match for the 401(k) is 5% of your annual salary, if you are contributing at least that amount. Our example employee receives an additional $10,000 using the Intel match. This brings their total investment into the 401(k) to $30,500.

What you may not know, is that the Federal limit for total dollars going into a 401(k) in 2022 is $61,000. This means there is a $30,500 gap between what you have contributed to your 401(k) and the Federal limit.

This is where you see the power behind the Mega Backdoor Roth. Intel will allow you to invest after-tax dollars, up to $30,500 in this instance, into your 401(k) and then convert those dollars to a Roth account within the plan. You will need to call Fidelity, after your first after-tax contribution, to let them know you want to convert these dollars to a Roth. Once this is complete all after-tax contributions are converted automatically.

How Does the Mega Backdoor Roth Help Intel Employees Reduce Taxes?

Many of you reading this are saving money above and beyond your regular $20,500 401(k) contribution and more than likely you’re saving into a brokerage account (individual account, joint account, etc.). Within these accounts you hold investments, which inevitably over time kick off interest income, dividends, and capital gains. All of these events are taxable within brokerage accounts and over the long run, this taxation can create a substantial tax drag on performance.

Within a Roth you can hold the exact same investments, but the same interest income, dividends, and capital gains are tax-free now and when you retire!

When you do retire, having additional money in a Roth account enables you to manage your retirement distributions and give you more control over your taxable income. This could allow you to save even more from a tax perspective.

Take Advantage of the Intel Mega Backdoor Roth

Hands down – this is one of the most powerful benefits available to Intel employees! The long-term benefits of increasing your retirement savings, particularly by utilizing the Intel Mega Backdoor Roth Conversion strategy, could make a massive positive impact on your retirement.

If you want to start taking advantage of the Intel Mega Backdoor Roth Conversion, or any of the other benefits offered in the Intel employee benefits plan, please schedule some time to discuss your questions.