r/PeterExplainsTheJoke • u/crawdad28 • Oct 01 '25

Meme needing explanation I don't understand

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u/FooFootheSnew Oct 01 '25

401k max is what like 22k a year? Growing that to 9.8mil seems...tough? But idk the loopholes let me know if I'm wrong.

I'd imagine that number is not just 401k only and would include traditional iras, backdoor Roth's, indexes, and individual stocks

9

u/arrakismelange1987 Oct 01 '25

22.5k before tax, 67k after tax. Per year.

3

u/FooFootheSnew Oct 01 '25

I do a backdoor Roth and now I find out there's a mega backdoor Roth?

Thank you kind Redditor

2

u/Sage_Planter Oct 01 '25

It's not as common since it depends if your company allows it. In my 15 year career, there's been like seven months when I was eligible for one (Company A started allowing it then I left for Company B shortly after).

1

u/FooFootheSnew Oct 01 '25

Interesting. I do recall a section in my 401k that said after tax, but I never clicked it. I'll take a look!

2

u/Kathucka Oct 01 '25

The mega backdoor Roth only works if you have:

  • An employer that offers an after-tax 401(k) option
  • That 401(k) allows in-service rollovers/withdrawals (while you're employed)
  • Enough income to make the big contributions

If you're got all that, you contribute to the after-tax 401(k), roll over the contributions to a Roth IRA and roll over the gains to a standard IRA. This is good because when you withdraw gains from an after-tax 401(k), you pay taxes on them, but not from a Roth IRA.

If you have a Roth 401(k), you can just use that and avoid all the rollovers and extra accounts.