- Andre Nader built a seven-figure portfolio by saving and investing in index funds.
- He leveraged his technology career and dual income household to maximize his savings and investments.
- One of the strategies he used to make the most of his tax-advantaged accounts is known as the “mega backdoor loss.”
Andre Nader saved a portion of his income before he turned 40 by following a few simple basics: saving a portion of his income, investing in low-cost index funds, and making the most of tax-advantaged accounts. Builds a 7-figure portfolio.
It helped that he worked in the technology industry. He said he started with a modest salary of $40,000 immediately after graduation, but eventually landed a high-paying job at Meta in 2014.
“Being in the tech industry and being in a two-income household has helped me win the income game,” Nader, whose wife is a designer at Uber, told Business Insider.
When he was laid off in 2023, he and his wife had enough money from his tech-related income and savings to not have to look for another job. Nader blogged about financial independence. fang fire Since 2021, I currently write full-time on Substack and provide one-on-one FIRE (Financial Independence, Early Retirement) coaching.
Nader, a high-income earner who describes herself as a “naturally frugal person,” found herself saving too much each month. When he worked full-time, he and his wife used one part of their income to pay for the household and the other part to save.
He spent a lot of time thinking, “How can I store this as efficiently as possible?” he said. “And for many in the tech industry, that's going to be leveraging tax-advantaged accounts, because when you're in a period of such high income, you can defer those taxes into the future. This is because the amount that can be made could potentially be very, very large.'' “
A type of tax-advantaged account, Roth IRAs offer significant benefits such as tax-free growth, but they have income limitations that prevent individuals like Nader from contributing funds directly. In 2024, single taxpayers must have an income of less than $146,000 and married couples filing jointly must have an income of less than $230,000 to contribute to a Roth.
Mr. Nader uses a workaround known as the mega-backdoor to circumvent Roth IRA income limits, and recommends that all high-income earners take advantage of it if possible.
Contribute up to $69,000 annually to your 401(k) using the mega-backdoor Roth
The Big Backdoor To understand how the Roth works, it's important to first understand how after-tax 401(k) contributions work. Some employers offer after-tax 401(k)s. Mr. Nader was available when he was at Meta, and his wife was available at Uber. This allows you to save even more after you max out your traditional 401(k).
In 2024, the annual contribution limit for 401(k) employee contributions will be $23,000. However, the combined contribution limit for employees and employers is $69,000. Let's say you max out your 401(k) and contribute $23,000, and your employer contributes $5,000 through a matching program. So let's say you have $28,000 in your 401(k). The limit is $69,000, so if your plan allows after-tax contributions, you can put an additional $41,000 after-tax into your account.
Mr. Nader, founder of FAANG FIRE, his wife who works for Uber, and their daughter. Provided by Andre Nader
In Nader's wife's case, Uber will match up to $8,000, meaning she will pay an additional $38,000 in after-tax contributions after maxing out her 401(k) in 2024. ($9,000 – $23,000 – $8,000), he explained.
The problem is that while in after-tax status, any earnings from these contributions are taxable.
That's where the giant backdoor Roth comes into play. This allows you to transfer your after-tax 401(k) contributions to a Roth IRA or Roth 401(k) and grow them tax-free. Not all 401(k) plans allow this conversion, so you should understand your plan, including its limitations, before making after-tax contributions.
In Nader's experience, Execute the giant backdoor Roth When he worked at Meta, work was quick and easy. He logged into Fidelity NetBenefits (his 401(k) provider) and selected the percentage of his after-tax earnings he wanted to contribute. I was then able to perform an in-plan conversion and selected the option to “Convert after-tax contributions.”
“No one knows that every time I post on LinkedIn, I get this perk,” says the CEO, who has nearly 25,000 LinkedIn followers and is especially an employee of FAANG (Facebook, Amazon, Apple, Netflix, Google). says Nader, who is writing an article for . Aiming for financial independence. “This additional $30,000 can effectively go into a Roth 401(k), which is a very powerful type of account.”
He recognizes that not everyone has access to this strategy or the funds to save $69,000 a year in a 401(k). But if you're a high-income earner and you're saving that money anyway, and your plan allows for a huge backdoor Roth, it's extremely valuable to let them know it exists. there is.”