Mega Back Door Roth Questions

[live4soccer7]

I have an LLC S-corp setup. I am the only employee with W2 wages that my account will issue once a year in the 4th quarter.

I have just paid off all of my debt, mortgages, etc... and I would like to now put all that freed up money in to retirement accounts. I came across the "Mega Backdoor ROTH". Can you please confirm my understanding of this method.

I have setup a Solo 401k at vanguard. I can contribute as an employee to a ROTH 401k or Traditional 401k and as an employer I can contribute to only the Traditional 401k.

As an employee, I can only contribute 19.5k. Period. There is no way I can contribute more than this from an employee/personal standpoint. I know that the total contributions can not exceed 57k.

This would leave the possibility of 37.5k that could be contributed, but from my understanding the rest of this can ONLY be done from the employer side of things, which is limited by 25% of the W2 wages. Currently my W2 wages that I pay myself are approximately 40k. This would mean that I would be capped here at about a 10k employer contribution.

In this scenario, the maximum that I could actually contribute would be 19.5k+10K=29.5K. Is this correct? Is there a way around this to contribute the remaining 27.5K from the maximum allowed 57k?


I have a ROTH IRA, HSA, now a 401k. My contribution maxout flow would look like this:
HSA
ROTH IRA
401k ROTH (employee standpoint)
401k Traditional (employer standpoint), I can do an in plan rollover at vanguard, according to vanguard

[live4soccer7]

I just found this information: https://www.mysolo401k.net/solo-401k/

Here is an excerpt from their FAQs:
The Mega Back Door Roth Solo 401k Strategy Question:

If I do the mega back door Roth/Voluntary After-Tax  Solo 401k Contributions, is it true that I can do those to the full amount possible without having to worry about the employer contribution 25% of Net Earnings rule?  Meaning the Employer non-elective contributions up to  25% of compensation rule.  That is as long as I have business income up to the full 37K I can contribute that full amount as a voluntary contribution?
ANSWER:

Your understanding is correct that the solo 401k rules allow for just making voluntary after-tax contributions without having to make pretax solo 401k contributions.


EDIT
If this is true then what becomes the contribution limiting factor? Is it that you can't exceed your W2 income or is it also business income as well? Where would be the best place to setup something like this as it seems the guy at vanguard wasn't fully aware of this entire strategy if the above is true and the 25% can be ignored.

The above, to me, suggests that the Employer can simply contribute $0 and the Employee can contribute their original limit of 19.5k and then After-Tax non-Roth contributions of the remaining 37.5k and immediately roll that over to either your ROTH IRA or an in plan roll over to the ROTH 401k.

[terran]

Here's a thread by someone who went on a similar journey and I believe was successful: https://forum.mrmoneymustache.com/taxes/anyone-execute-a-mega-backdoor-roth-in-solo-401k/. If that thread doesn't answer your questions the OP should be able to

[live4soccer7]

Thank you very much for the link to the thread. I have been reading and digesting that information.