This little-known Roth strategy can help high income earners save 100’s of thousands more in tax-free retirement income – if you know how to use it.
Roth IRAs have long been a favorite among savers who want tax-free growth, but for high income earners, contribution limits can feel like a ceiling. Cue the Mega Backdoor Roth conversion: an advanced but underused strategy that can help turbocharge your retirement savings and greatly increase your tax-free savings.
To illustrate: Take a 45-year-old earning $200,000 a year who adds $12,000 in after-tax 401(k) contributions each year. This could add ~$350,000 in additional tax-free savings over 15 years (assuming 7% annual returns). This can be a game changer for some households.
Let’s dive in to better understand what it is, how it works, and how to determine if it’s the right fit for you.
First a refresher on the Roth IRA and Back Door Roth IRA
Roth IRA accounts allow you to contribute after-tax dollars into an account that grows tax deferred. As long as you’ve had the account open for 5 years and are 59 ½ or older you can take the growth and interest out tax free. This can be a huge tax saving if you have a while to go until retirement and expect to be in a higher tax bracket. In some cases, it can even save you money if you expect to be in the same bracket in retirement. You can use a calculator like this to help illustrate its potential value for your situation. One major caveat is that Roth IRA contributions are subject to income limits.
The work around is called the Back Door Roth IRA. If you are above the income limits, then you can complete what typically is a two-step process to make a Roth contribution with your preferred bank or broker. The first step is to make a contribution to an After-tax IRA, then complete the required paperwork to convert the After-tax IRA into a Roth IRA, technically called an IRA recharacterization.
Now that we’ve refreshed the basics of Roth IRAs and Backdoor Roths, let’s look at how the Mega version takes this idea to the next level.
What is a Mega Back Door Roth?
A mega backdoor Roth refers to a strategy that can allow some people to contribute more money to a Roth account, when they’ve exhausted other options available to them. This strategy allows you to transfer After-tax 401(k) contributions into a Roth IRA and/or Roth 401(k).
At a fundamental level, converting after-tax voluntary 401(k) money to a Roth 401(k) allows employees to save significantly more, tax-free, for retirement.
Although you don’t receive a current-year tax deduction for the money contributed into an after-tax account, once those savings are converted to a Roth 401(k) or Roth IRA those funds grow and can be withdrawn tax-free as long as you are age 59 ½ or older and it has been 5 years since your initial contribution into the Roth 401(k) or Roth IRA.
What are the 2025 Mega Back Door Roth Limits?
The maximum mega backdoor Roth limit is determined by each year’s 401(k) contribution limit set by the IRS for employees and employers. For 2025, here’s how the Mega Backdoor Roth limits break down:
- $70,000 total for those under 50
- $77,500 for those 50 and older
- $81,250 for those aged 60–63 (thanks to the Secure 2.0 “super catch-up” rule)
Since these are combined limits (your contributions + your employer’s), you’ll need to check how much of that limit is already filled by company matches or profit-sharing. The remaining gap is how much after-tax money you can still contribute — up to roughly $46,500 for many savers under 50.
If you have a Roth 401k at work and the plan allows for the Mega Roth option, you can generally choose whether the final destination of your mega contributions is the Roth 401(k) via an in-plan Roth conversion or a Roth IRA.
When Would a Mega Back Door Roth be the right move for you?
You might be a good candidate if:
- You have 3-6 months of emergency savings.
- Your 401(k) plan allows after-tax contributions and in-plan Roth conversions.
- You’ve already maxed your regular 401(k)and/or IRA contributions.
- You’re not juggling high-interest debt (>7-8%) or expecting major short-term expenses.
- You want to avoid the immediate additional tax bill of converting pre-tax dollars into Roth.
- You want more control over your retirement tax bill later in life.
Once you’ve determined if the Mega Back Door Roth makes sense for you, next is to determine if the option is available to you and understand how to implement it.
How Does the Mega Back Door Roth Work?
In order for this to be a viable strategy, your employer must offer:
1) An After-tax 401k and
2) Allow for in-plan Roth 401(k) conversions or allow for a rollover of after-tax contributions into a Roth IRA.
Be sure to check with your 401k plan administrator or Human resources department to determine if this is available to you.
For example, if your plan allows in-plan Roth conversions, you could direct your after-tax contributions straight into your Roth 401(k). If not, you may be able to roll them into a Roth IRA — typically with help from your plan administrator or Human resources department.
If your plan offers an after-tax account but does not offer an in-plan Roth conversion or Roth IRA rollover option, then you will have to wait until you separate from your company to transfer the after-tax contributions into a Roth IRA.
Note that there may be tax implications if the contributions have gone up in value at the time of conversion – they would be assessed on the difference between your original contribution and the value on the day of conversion. For example, if you contributed $12,000 and that balance has grown to $14,000 on the date of conversion, that $2,000 difference would typically be taxable.
To avoid this, most people aim to initiate the conversion of the after-tax contributions as soon as possible.
Summing it all up
Think of the Mega Backdoor Roth as an additional option to help shorten your path on the road to retirement. If you’ve already nailed the basics like having an emergency fund, eliminating high interest debt, and maxing out your qualified retirement account options then this strategy can help you go farther, faster. The key is doing it right.
If you think this makes sense for you, consider talking with a qualified and trusted financial planner or tax advisor to help map out a strategy that best fits your goals. You may even still have time to take advantage of this before the end of the year. Remember, the earlier you start, the more years your money has to compound tax-free and that’s where the real magic happens.