The Mega Backdoor Roth Explained

Roth accounts, like a Roth IRA or Roth 401k, are among the most tax-friendly ways to save for retirement. They allow your investments to grow tax-free, and qualified withdrawals in retirement aren’t taxed. For many high earners, the idea of building a completely tax-free retirement pot is especially appealing.

But there’s a catch: Roth accounts come with strict contribution limits and, in the case of Roth IRAs, income restrictions that can block direct access. That’s where the Mega Backdoor Roth comes in.

In this guide, we’ll break down what the Mega Backdoor Roth is, how it works, and how some earners can use it to go well beyond the standard contribution limits.

What is the Mega Backdoor Roth?

The Mega Backdoor Roth is a strategy that helps high earners bypass the usual income and contribution limits on Roth accounts.

Here’s the key idea: while Roth contributions are limited and restricted by income, Roth conversions are not. There’s no income cap or dollar limit on how much you can convert into a Roth IRA or Roth 401k.

This strategy takes advantage of that rule. Instead of trying to contribute directly to a Roth account, you contribute to an after-tax 401k, which allows much higher contributions. Then, you convert those after-tax funds into a Roth account, either inside the 401k or by rolling them over to a Roth IRA.

Because high earners are often blocked from contributing to a Roth IRA directly, the Mega Backdoor Roth offers a workaround. It lets you enjoy the same tax-free growth and retirement withdrawals, but through a different path.

The vehicle that makes this possible is the after-tax 401k, a lesser-known part of some employer retirement plans. Unlike traditional or Roth 401k contributions, after-tax contributions are not limited by the elective deferral cap. Instead, they count toward the total 401k contribution limit—$70,000 in 2025, or $77,500 if you’re 50 or older.

✏️ Hypothetical Example:

Let’s say you’re contributing for the 2025 tax year (with IRA rollovers allowed until April 15, 2026). Instead of contributing only $7,000 to a Roth IRA or $23,500 to a Roth 401k, you could contribute tens of thousands more into your after-tax 401k—then convert it all into a Roth account.

The result? You could potentially put away up to $70,000 into Roth accounts in one year, depending on your employer plan. That’s over 10 times the Roth IRA limit, and nearly three times what you could contribute to a regular 401k through salary deferrals.

How It Works

The Mega Backdoor Roth can seem complicated at first, but the steps are fairly straightforward once you understand the flow.

Here’s how it works:

✏️ Hypothetical Example:

Let’s say you’re under 50 and contributing for the 2025 tax year. You max out your employee 401k contributions at $23,500. Your employer matches 6 percent of your $70,500 salary, which comes out to approximately $1,410.

That’s a total of $24,910 going into your 401k from you and your employer.

The overall 401k contribution limit for 2025 is $70,000, so you subtract your total contributions so far:

$70,000 − ($23,500 + $1,410) = $45,090

That $45,090 is the amount you could contribute to your after-tax 401k. Once funded, you can immediately convert that amount to your Roth IRA or Roth 401k.

Not Every Company Offers the Mega Backdoor Roth

While the Mega Backdoor Roth can be a powerful strategy, not all 401k plans support it. Whether you can take advantage of it depends entirely on your employer’s plan design.

To use this strategy, your company’s 401k plan must offer both of the following features:

✅ The ability to make after-tax contributions

✅ The ability to do Roth conversions on those after-tax contributions

Without both options, the Mega Backdoor Roth isn’t possible. Fortunately, several major employers do support this feature. Companies like Google, Microsoft, Apple, Amazon, Meta, and Nvidia offer 401k plans that include after-tax contribution buckets and allow Roth conversions.

Roth Conversion Options

Once you’ve contributed to your after-tax 401k, the next step is to convert those funds into a Roth account. There are two ways to do this:

Some employers may only allow one of these options. If your plan allows both, you can choose based on your goals and preferences.

While in-plan conversions are often easier to execute, rolling funds into a Roth IRA tends to offer more flexibility and long-term advantages:

✅ More investment choices: Roth IRAs are self-directed, unlike 401ks which are limited to your plan’s menu.

✅ Penalty-free access to contributions: Roth IRAs allow you to withdraw contributions at any time without tax or penalty.

✅ No required minimum distributions (RMDs): Roth IRAs aren’t subject to RMDs during your lifetime, unlike Roth 401ks which require distributions starting at age 73.

✅ Better for inheritance planning: Inherited Roth IRAs are tax-free to beneficiaries, making them more effective for wealth transfer.

📝 Reminder: Conversions from an after-tax 401k are not taxable, because the contributions were made with after-tax dollars.

What If Your Employer Doesn’t Offer It?

If your company’s 401k plan doesn’t support the Mega Backdoor Roth, there are still other strategies worth exploring. 

One common workaround is the Backdoor Roth IRA. This allows high earners who exceed the Roth IRA income limits to contribute to a Traditional IRA first, then convert those funds into a Roth IRA. Since conversions aren’t subject to income restrictions, this method can offer similar tax advantages.

If you have a side business, you could also look into the Mega Backdoor Roth Solo 401k, which mostly works the same but has the added benefits a Solo 401k plan gives you.

📌 Interested in how a Solo 401k Mega Backdoor Roth works? You can follow our step-by-step guide to get started with Carry.

Wrapping Up

The Mega Backdoor Roth can be a powerful way for high earners to boost their retirement savings in a tax-advantaged way. While it depends on having the right type of 401k plan, it’s worth exploring if you’re already maxing out traditional contribution limits and want to do more with after-tax dollars.

📌 Looking to learn more? Check out our other articles on retirement strategies, tax planning, and personal finance:

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