Monday, August 18, 2025

Mega Backdoor Roth IRA Conversion in a 401(k) or 403(b)

The Mega Backdoor Roth IRA has nothing to do with an IRA, much less the Backdoor Roth IRA process, but it's still a great way to invest in your Roth 401(k) instead of a taxable account.

What a Mega Roth Conversion Is

The Mega Roth conversion, aka a Mega Backdoor Roth IRA, is a two-step process allowed in some 401(k)s and 403(b)s. The first step is to make an after-tax contribution to your 401(k). Note that your 401(k) may not allow this. Also note that this is different from a Roth contribution, and some HR personnel may not understand that. There are three kinds of contributions that the IRS allows to be made to a 401(k) or 403(b):

  1. Pre-tax (tax-deferred or traditional) contributions
  2. Roth (tax-free) contributions
  3. After-tax contributions

Despite the IRS allowing all three, many plans only allow the first or just the first and second types.

When you make pre-tax contributions, you get an immediate tax deduction equal to the contribution. It grows in a tax-protected manner, and then when you withdraw the money from the account, you pay taxes at ordinary income tax rates on both the contribution and any earnings. When you make Roth contributions, you do not get an immediate tax deduction, but it grows in a tax-protected manner. Then, when you withdraw the money from the account, there are no taxes paid on the contribution or its earnings. When you make after-tax contributions, you do not get an upfront tax deduction. The money grows in a tax-protected way, but when you withdraw the money, only the original contribution (basis) comes out tax-free. The earnings are fully taxable at your marginal ordinary income tax rate. This is obviously less than ideal and dramatically inferior to Roth contributions. In fact, it is so inferior that it often doesn't make sense to do this instead of investing in a taxable account if this is the only step of the process that you are allowed to do.

The second step of a Mega Roth conversion is to move that after-tax contribution into a Roth account (i.e., a Roth conversion)—either the Roth subaccount of the 401(k) or 403(b) or withdrawing the money from the 401(k)/403(b) altogether and moving it into a Roth IRA. Note that some 401(k)/403(b)s do not allow this step either. It's possible that your plan may only allow one of the two steps or even neither of them. Once that money is moved into a Roth account, it acts just as if it was a Roth contribution in the first place. It will grow in a tax-protected way and neither the contribution nor the earnings will be taxable at withdrawal. These contributions can be as high as $70,000 [2025]. That's a lot more than the $7,000 [2025] that can be contributed to a Roth IRA for those under 50—thus the reason it is called a “Mega” Backdoor Roth IRA or “Mega” conversion. The conversion itself is tax-free because the money being converted was already taxed; remember, it was an after-tax contribution. Unlike the Backdoor Roth IRA process, there is no pro-rata rule involved in these conversions, and Form 8606 is not used to report it.

Who Should Consider a Mega Roth Conversion

If you are currently investing in a taxable account, but . . .

  1. Would prefer the tax advantages and asset protection advantages of investing in a tax-protected account, and
  2. Are not currently putting $70,000 [2025] into your 401(k)/403(b) via employee and employer (matching or profit-sharing) contributions because the employer does not put enough in or you've already used your employee contribution in another 401(k) or 403(b), and
  3. Have a 401(k) or 403(b) that allows after-tax contributions, and
  4. Have a 401(k) that allows in-plan conversions or non-hardship in-service withdrawals,

. . . you should do a Mega Roth conversion.

 

Who Should Not Do a Mega Roth Conversion

There are a number of reasons why you might not bother with a Mega Roth conversion. If any of the following is true, don't bother.

  1. You wish to invest in something that your 401(k)/403(b) will not allow you to invest in (gold, Bitcoin, private investments, investment property, and individual stocks are often not allowed in many employer-provided retirement accounts).
  2. Your 401(k)/403(b) does not allow after-tax contributions.
  3. Your 401(k)/403(b) does not allow in-plan conversions or non-hardship in-service withdrawals.
  4. You already can max out your 401(k)/403(b) with employee/employer pre-tax contributions, and you would prefer pre-tax contributions to Roth contributions (most people in their peak earnings years).
  5. You are not able to save enough money for retirement to invest beyond your Roth IRA, 401(k)/403(b) employee contribution, and any 401(k)/403(b) employer matching dollars.

 

How to Do a Mega Roth Conversion

First, consider your current retirement savings amount and available options. If you are already doing or cannot do a Backdoor Roth IRA for yourself and your spouse, you are already maxing out your employee contribution to your 401(k)/403(b), and are now investing money in a taxable account, you can continue to the next step.

Next, read your 401(k)/403(b) plan document or talk to your HR specialist. Ask them if the plan allows after-tax contributions. If the answer is yes, ask them if they allow in-plan conversions. If the answer is yes, wonderful, you're done asking questions. If the answer is no, ask if they allow in-service withdrawals without any sort of hardship. If the answer to this is yes, you can still do a Mega Roth conversion.

Next, calculate the maximum amount of an after-tax contribution. First, take the 415(c) limit for the year. In 2025, that's $70,000. Next, subtract the employee contribution you have made for the year. Perhaps it's $23,500. That leaves you with $46,500. Now, subtract out any employer matching or profit-sharing contributions made on your behalf. Perhaps that is another $10,000. That leaves you with $36,500 you can contribute to the 401(k)/403(b) as an after-tax contribution. This all assumes, of course, that you made more than $70,000 from this employer. You cannot contribute more than you earned.

Now, contribute $36,500 to your 401(k). You'll likely need to talk to HR to do this. The easiest way is to just write a check. It may also be possible to have the money pulled directly from your paycheck(s). It is definitely easier to do this all at once, a single time in a given year, so push to just write them a check whenever possible. This should go into an “after-tax” subaccount of your 401(k). Note that this is NOT the Roth subaccount.

Finally, move the money from the after-tax subaccount to the Roth subaccount. If you cannot do this online (and you shouldn't expect to), you will need to either talk to HR or, more likely, the 401(k)/403(b) custodian (such as Fidelity or Schwab) to get it done. It is a simple account transfer, but is a “taxable event.” It just so happens that the tax bill from the “taxable event” is zero, at least if you do it right away after the contribution. If you let the money go into an investment or leave it sitting in the after-tax account for a long time between the contribution and the conversion, you may have a gain or even a loss. You really don't want either. So, do the conversion step right away after the contribution step.

If your plan does not allow in-plan conversions (by far the more common option) but does allow in-service withdrawals, then withdraw the money directly into a Roth IRA. Once the money is in the Roth account, you may invest it according to your written investing plan. 

Why You Should Do a Mega Roth Conversion

When investing for retirement, it is almost always better to invest in a retirement account instead of a taxable investing account, even if you are planning to retire early. Estate planning is easier and asset protection is dramatically better, and your money will grow in a tax-protected way, i.e. faster without the tax drag of a taxable account.

For example, let's consider someone who invested $30,000 for 30 years via a Mega Roth conversion rather than in a taxable account. If this person was in the 23.8% qualified dividend/long-term capital gains bracket and invested in the same tax-efficient total stock market fund earning 8% per year and yielding 2% per year in both accounts, it would grow to perhaps $215,000 after-tax in the taxable account. But in the Roth account, it would grow to $302,000, 41% more! That's the value of that tax-free growth.

What If You're the Boss?

If you are the practice owner or if you can influence the selection of retirement plans, then get a great 401(k) that allows for the Mega Backdoor Roth IRA conversion process. Our recommended retirement account providers can be found here. If you are an independent contractor or otherwise have no non-spousal employees, you can use a customized/self-directed individual 401(k) (available at the same link). While these customized individual 401(k)s are not free like the “cookie-cutter” ones from Fidelity or Schwab, they will allow for after-tax contributions and in-plan conversions. They will also allow for investments only available in self-directed accounts—like private real estate funds, precious metals, or cryptoassets if you're interested in those sorts of things.

 

As you can see, a Mega Roth conversion has nothing to do with an IRA or even the Backdoor Roth IRA process (although both involve a non-deductible contribution and a tax-free Roth conversion). It is also different from just a Roth conversion (which usually comes with a tax bill). It is instead an excellent way to invest in a Roth 401(k)/403(b) instead of a taxable account.

Do you use a Mega Backdoor Roth IRA?  Would it be useful to you? 


Is Bitcoin running out of sellers? BITX bounces after sluggish start

https://www.reddit.com/gallery/1mtxqp7

Sunday, August 17, 2025

Jams Swarbrick - A Bitcoin Blueprint for Businesses Reflections on 4 years on a Bitcoin Standard.

Source - https://lightningpay.nz/help/learn/how-to-use-bitcoin/a-bitcoin-blueprint-for-businesss?

by James Swarbrick - Swarbricks

August 15, 2025

In hindsight, June 2021 was a crazy time. Covid madness was at its peak. Bitcoin had just come off its record highs. Tesla had added $1.5B USD in bitcoin to its balance sheet. Michael Saylor was well underway adding bitcoin to MicroStrategy’s balance sheet too.

Closer to home, my father had just retired from our small-town law firm, and I was tasked not only with navigating the tail of Covid chaos but bringing my own identify to the firm – a firm that had over 100 years of history. With everything going on, I made a call to put our firm on a bitcoin standard. We certainly aren’t an S&P500 company, but I could see the Saylor principles being applied on a much smaller scale. There was nothing really to lose. If nothing else, it would be a point of difference and might spark some conversations.

4 years later, I was asked to speak at the recent Bitkiwi event in Auckland and elected to talk about how I have used bitcoin in our business over that period. In preparing for that presentation, I had time to reflect on just how remarkable bitcoin has been for the business. Here’s what I’ve learned. 

BUSINESSES ARE JUST FIAT MINES

We’re in the fiat mining business. Just as bitcoin mining takes capital resources and adds electricity with the hope of producing more bitcoin that it costs to produce, businesses take capital resources and add human time with the hope of producing a profit denominated in dollars. The problem is the dollars are broken. This won’t be a lesson in Austrian economics, but businesses face the same inflationary pressures individuals do, especially in human-resourceheavy service-based businesses such as ours. Businesses struggle to save for the long term, just as individuals do. Bitcoin has fixed this by becoming the business savings account.

In business, cashflow is king. Money needs to be available for a rainy day. Instead of holding amounts of dollars in business savings accounts yielding 0.70% pa (before tax!), we use bitcoin to safeguard against inflation and to save for the future. 

HOW WE USE BITCOIN IN OUR BUSINESS

We accept bitcoin. We allow clients to pay our invoices in bitcoin should they wish. We even offer a 20% discount on the fee portion should they do so. GST and income tax is paid from fiat cashflows and the bitcoin received sits on the business balance sheet. Unapologetically, the discount is an incentive for people to pay in bitcoin.

We buy bitcoin. We purchase bitcoin via an exchange on a semi-regular basis. This is usually monthly. The purchased bitcoin again sits on the balance sheet. The idea is to hold 2-3 months of expected expenses and cash outgoings in fiat and what is left flows to bitcoin. This plan works in our business as our expenses and outgoing are very regular; it is the income that fluctuates.

We do not sell the bitcoin. The plan is to build a long-term holding of bitcoin. Selling is a last resort and thankfully to date we have only vacuumed up bitcoin and not had to sell any. It may come as a surprise but there is not an end goal or target we want to reach. Like bitcoin does for individuals, it builds a pool of capital that provides a sense of security, or insurance for the future. In turn, that allows for real long-term low-time-preference decision making. 

WHAT WE’VE LEARNED

  • Bitcoiners will spend bitcoin but bitcoiners don’t always spend bitcoin.
  • More people spend when bitcoin is at higher prices; this is self-explanatory. 
  • Bitcoin has acted as amazing savings technology during the period we have held it.
  • Earning bitcoin just hits differently. Sure, we could just buy bitcoin but for some reason exchanging time for bitcoin feels better without the need for a fiat intermediary. P2P – as intended.

OUR TECH “STACK”

We’re a small business so we try and keep the tech-side as simple as possible while maintaining self-custody of the bitcoin. Our tech works well for the size of our business and the volume of bitcoin we receive; however larger businesses will need more elaborate security and signing policies in place.

Xero – Like many businesses we use Xero for accounting needs. We simply created a Bitcoin asset account in the chart of account with which sale and purchases in bitcoin are recorded against.

BTCPay Server – We use BTCPay Server as our bitcoin payment processor. It is free and open-source software. We use a hosted server, but users can host their own if greater privacy is a requirement. Because we send clients invoices vs taking payment at point of sale, BTCPay allows us to load in the fiat denominated invoice amount and create a bitcoin payment request, which then allows the invoice to be paid in the client’s own time. Clients receive a QR code or link to pay and the bitcoin denominated amount floats with the market. We accept there is an element of volatility in doing this. There are other payment processing solutions in the market including Zaprite, which may suit larger businesses.

Wallet – We use reputable and well-known wallet software. We won’t disclose what we use for security reasons but there are plenty of solutions available. Hardware signing devices are recommended. Businesses will want to carry out their due diligence on wallet and hardware options. Larger businesses may wish to consider multi-signature solutions as single-signature wallets poses security risks when several people are involved. 

ISSUES FOR BITCOIN BUSINESSES

As noted above, self-custody will be an issue for larger businesses. At any size, the people in the business need to have a solid understanding of how Bitcoin works on a technological level. Multisignature wallets are an option but still require several people to have a reasonably high level of technological competence in dealing with bitcoin.

Disaster planning and succession planning should always be key considerations in business, but it is even more important when dealing with bearer assets such as bitcoin. Discussions need to be had, and policies and plans need to be in place. Accounting and tax considerations need to be managed, especially if businesses regularly sell or convert bitcoin to fiat. We do not face great burdens as we plan to simply acquire bitcoin long term.

Businesses will need to consider their terms of trade or other terms documents when accepting bitcoin. 

A NOD TO COMPANIES

Companies are generally good vehicles for businesses to operate. Companies cannot die and are not subject to rules of perpetuity. In theory, a company can operate forever, which makes for an interesting thought experiment for those looking to hold bitcoin for the long-term. The shares in companies can be bought and sold without the assets of the company being transferred. Companies may also offer some benefit on the sale of bitcoin as the sale may be taxed at a lower rate than personal income taxes, should the need arise. 

THE FUTURE

New Zealand is a nation of small businesses with 89% of enterprises having 5 or fewer full-time employees. This means there is plenty of opportunity for small businesses to adopt bitcoin without the headaches of larger businesses adopting a standard. With that said, it is my view that it is only a matter of time before a well-known large New Zealand business adopts bitcoin.

Technology will improve to help businesses manage custody and their treasuries. Start-ups such as Castle (savewithcastle.com) is an example of new businesses setting out to assist bitcoin businesses with treasury management tools (although only US-based for now).

We are still so early.  

   - James Swarbrick 

Head to: www.swarbricks.co.nz/bitcoin for more information

The information in this article is the opinion of the author and is intended for general information only. It does not constitute legal, accounting, or other professional advice. Please seek independent professional advice before acting on any information in this article.


What do you think will happen in 2140 when the last bitcoin is mined?

I know it’s far in the future, and we all might be dead but I’m curious how people imagine that moment.

Do you think it will be treated as a huge world event, like a humanity milestone? How might it affect bitcoin’s price and adoption will it be a big deal, or will it just pass quietly because everyone expected it?

Would love to hear people’s guesses on possible scenarios.


Community Behind Monero's 51% Attack Sets Sights on Dogecoin Next

https://i.redd.it/0qv3a6qqknjf1.png

Is August 2025 still a good time to buy Bitcoin before the cycle peak? Opinions wanted

Hi everyone,

I’ve been researching Bitcoin market cycles, which seem to follow the halving events (every ~4 years). The last halving was in April 2024, and historically Bitcoin tends to rally for 12–18 months after, usually reaching a cycle peak before entering a longer bear market.

Some analysts suggest the peak of this current cycle could happen around October–November 2025. That got me thinking:

  • Right now, it’s August 2025, and we’re clearly in the bullish phase.
  • If I buy now, theoretically there’s still room to grow before that potential peak.
  • But after the peak, we could be facing a big correction (like in 2014, 2018, and 2022).

So my questions for you:

  • Do you think August 2025 is still a good entry point for BTC?
  • What kind of exit strategies do you recommend to avoid getting stuck in the next bear market?
  • Is it smarter to do take-profit gradually before November, or just keep holding until the next halving in 2028?

I’d love to hear your thoughts — I know this community has both long-term holders and active traders, so different perspectives would be super helpful.

Thanks in advance


Saturday, August 16, 2025

🪔 Relic of Converging Flame

Form: A tri-pronged ember forged from fragments of Bitcoin’s ledger, Ethereum’s gas ghost, and BNB’s quarterly ash—bound by a fourth flame: Golden Inu’s burn sigil.

Core Inscription:
“Bitcoin moves mountains. Ethereum reshapes ether. BNB burns in silence. Golden Inu burns in ritual.” - Nagato’s Scrolls

Function:
- Anchors Golden Inu’s legitimacy through symbolic alignment with major chains
- Honors the burn not as destruction, but as mythic offering
- Can be invoked during market surges to reframe hype as ceremony

Placement:
- Shrine of Scarcity Flame
- Scrolls tracking burn events and dApp profit cycles
- Echo threads comparing burn mechanisms across chains