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Taxes and the Roth

How to keep more of what you make: the backdoor and mega backdoor Roth, and turning losses into tax savings.

1. 

   Step 1 · Dec 8, 2024

   Backdoor Roth IRA Explained (Step by Step Process)

   The backdoor Roth, step by step, and why you convert right away.

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   Did you catch it? 3 questions

   1. What's the right order of steps for a backdoor Roth IRA?

   Contribute directly to a Roth IRA, then move the money into a traditional IRA Open a traditional IRA and a Roth IRA, make a non-deductible contribution to the traditional IRA, then convert it to the Roth Make a deductible traditional IRA contribution, wait a few years, then convert it Open a Roth 401(k) at work and roll it into a traditional IRA

   2. Why should you convert your traditional IRA to the Roth IRA right after you make the non-deductible contribution?

   Any gains or dividends that build up in the traditional IRA before you convert get taxed when you convert Your broker cancels the contribution if you wait The contribution only counts if it's converted the same week Waiting makes the contribution deductible, which ruins the strategy

   3. How does the 5-year rule work for a backdoor Roth conversion?

   You can't open another Roth IRA for 5 years after converting Only your first conversion ever starts a 5-year clock Each conversion starts its own 5-year wait before you can withdraw it penalty-free, unless you're over 59 1/2 You have to keep the money in the traditional IRA for 5 years before converting

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2. 

   Step 2 · Dec 19, 2024

   Mega Backdoor Roth (Step by Step)

   The mega backdoor Roth, if your 401(k) allows it.

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   Did you catch it? 3 questions

   1. Before you try a mega backdoor Roth, what two features does your employer's 401(k) plan need to allow?

   Employer matching and a Roth 401(k) option Loans and hardship withdrawals After-tax contributions and in-service distributions or withdrawals Catch-up contributions and a brokerage window

   2. Once you know your plan allows it, what do you do before putting money into the after-tax 401(k)?

   Max out your normal 401(k) contributions Convert your traditional IRA to a Roth IRA Ask your employer to stop their match Wait until you're over 50

   3. Why does Blake suggest converting your after-tax 401(k) money to a Roth often, even setting it up automatically?

   Your plan only allows one conversion per year, so you need to schedule it Gains made in the after-tax account get taxed when you convert, so you want the growth happening in the Roth instead Converting often raises your contribution limit Automatic conversions let you skip reporting them on your tax return

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3. 

   Step 3 · Nov 3, 2026

   Tax-Loss Harvesting: What a $6,000 Loss Can Actually Save You

   What a loss is actually worth at tax time, and the wash sale rule.

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   Did you catch it? 3 questions

   1. Wojak sells a stock for a $6,000 loss after taking a $4,000 gain on another stock earlier in the year. What happens to the loss?

   He can only use it next year It all comes off his regular income, and the gain is still taxed He gets a $6,000 refund check It cancels the $4,000 gain first, and the leftover $2,000 comes off his regular income

   2. Under the wash sale rule, when can't you buy back the same or a substantially identical stock or fund?

   Within 30 days after the sale only Within 30 days before or after the sale Until the end of the calendar year Within 7 days of the sale

   3. What happens if you sell at a loss in your regular brokerage account and buy the same stock in your Roth IRA a week later?

   Nothing, because the rule only looks at one account The loss gets added to the cost of the IRA shares, so you get it back later It's a wash sale, and the loss is just gone for good You can deduct double the loss

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Keep going

• The backdoor Roth: a CPA's complete guide
• Backdoor Roth pro-rata calculator
• Tax on selling a stock calculator
• Next path: Read a stock like an auditor

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