Key Takeaways
- A mega backdoor Roth is a retirement planning strategy that allows high-income earners to contribute after-tax dollars to a Roth 401(k) account, bypassing normal income limits.
- In 2025, a mega backdoor Roth strategy potentially allows for up to $46,500 in additional retirement savings for those under age 50 (assuming no employer match) that can grow tax-free.
- This advanced technique can yield significant tax benefits but it requires specific features in your employer’s 401(k) plan.
- Consider having a financial advisor guide you through the backdoor Roth process, as it can be tricky to do on your own.
What Is a Mega Backdoor Roth?
A mega backdoor Roth is an advanced retirement planning strategy that allows high-income earners to contribute after-tax dollars to their 401(k) plan and then convert those funds to a Roth IRA or Roth 401(k). Here’s the catch: You can only do a mega backdoor Roth if your employer’s 401(k) plan allows it. This strategy lets you enjoy tax-free growth on your investments and withdrawals in retirement — even if you make too much money to contribute to a Roth IRA.
Unlike a regular backdoor Roth IRA conversion (which involves making non-deductible contributions to a traditional IRA contributions then converting the funds to a Roth IRA), the “mega” backdoor Roth 401(k) version allows for much larger contributions to your 401(k) plan at work — potentially tens of thousands of dollars each year — making it particularly valuable for high-income professionals looking to maximize tax-advantaged retirement savings.
Understanding After-Tax Contributions in a 401(k)
Before exploring how the mega backdoor Roth works as a retirement planning tool, let’s break down the three types of contributions you can make to a 401(k):
- Pre-tax contributions: This money comes out of your paycheck before taxes and goes directly into your 401(k). You get a tax break now but you’ll pay taxes later when you withdraw the funds in retirement.
- Roth contributions: You pay taxes on this money now but then it grows completely tax-free and you won’t owe taxes when you take it out in retirement. There are annual limits on how much you can put in: $7,000 in 2025 ($8,000 for those age 50+).
- After-tax contributions: These are extra contributions you can make to your 401(k) beyond annual pre-tax or Roth limits. While they don’t give you an immediate tax break, they’re what make the mega backdoor Roth conversion possible.
Here’s how these different types of contributions work:
| Type of Contribution | Tax Treatment | 2025 Contribution Limits (age 50 and under) |
| Pre-tax | Contribute pre-tax dollars; pay taxes on both contributions and earnings when withdrawn in retirement | $23,500 |
| Roth 401(k) | Contribute after-tax dollars; no taxes on contributions or earnings when withdrawn in retirement | $23,500 |
| After-tax | Contribute after-tax dollars; no taxes on contributions when withdrawn but earnings are taxed unless converted to Roth | $70,000 (total plan limit) |
| Employer Match | Usually pre-tax; taxed when withdrawn in retirement | Counts toward total plan limit |
Note: For ages 50–59, a $7,500 catch-up contribution increases the pre-tax/Roth limit to $31,000 and the total plan limit to $77,500 in 2025. For ages 60–63, a special provision in the SECURE Act 2.0 allows even higher catch-up contributions, bringing the pre-tax/Roth limit to $34,750 and the total plan limit to $81,250. This provision was specifically designed to help people in this age range accelerate their retirement savings as they approach retirement.
2025 Mega Backdoor Roth IRA Limits
Here’s the real benefit of the mega backdoor Roth: If you only make pre-tax and/or Roth contributions to your 401(k), the most you can contribute is $23,500 for age 50 and under; $31,000 for age 50+; and $34,750 for ages 60–63. But when you make after-tax contributions, you can potentially put away up to $70,000 in your 401(k), dramatically increasing your retirement savings.
Here’s how it works:
Let’s say a 46-year-old professional has already maxed out their 401(k), making $23,500 in pre-tax contributions for the year. If their employer’s 401(k) plan allows after-tax contributions, they can potentially save an additional $46,500 (assuming no employer matching contributions).
$70,000 (total plan limit) – $23,500 (annual pre-tax contribution limit) = $46,500
Now, what if their employer made an additional $10,000 in matching contributions to their 401(k) account for the year? Then, their maximum after-tax contribution will be reduced by that amount.
$70,000 (total plan limit) – $23,500 (annual pre-tax contribution limit) – $10,000 (employer match) = $36,500
After you’ve made after-tax contributions to your 401(k), the final step is converting them to a Roth account. You can do that in one of two ways:
- In-plan conversion: If your 401(k) has a Roth option, you can convert your after-tax contributions directly to the Roth portion of your 401(k) without taking your money out of the plan.
- In-service distribution: If your employer allows it, you can withdraw your after-tax contributions while still employed and roll them over to a Roth IRA outside your employer’s 401(k) plan.
An important tax benefit: When you convert only the after-tax 401(k) contributions — but not the earnings on those contributions — the conversion doesn’t trigger additional taxes. This is because you’ve already paid taxes on your contributions.
It’s worth noting that making after-tax contributions does have some potential drawbacks. If you don’t convert them to a Roth account, any earnings on those contributions will be taxed at ordinary income rates when you withdraw them in retirement. Also, depending on your employer’s 401(k) plan, after-tax contributions may not be eligible for an employer match.
Who Can Benefit From a Mega Backdoor Roth?
The mega backdoor Roth strategy may be beneficial for:
- High-income earners who exceed the income limits for direct Roth IRA contributions ($165,000 for single filers and $246,000 for married couples filing jointly in 2025)
- Individuals who have already maxed out their regular 401(k) contributions and want to set aside additional income for retirement
- High-earning professionals who want to accumulate substantial tax-free retirement savings and anticipate being in a similar or higher tax bracket in retirement
- Successful business owners and executives with significant disposable income who want to boost their retirement savings through backdoor Roth strategies
For example, a senior executive earning $400,000 a year who already contributes the maximum to their regular 401(k) could use this mega backdoor Roth conversion strategy to set aside tens of thousands of dollars in additional tax-advantaged retirement savings each year. This retirement planning strategy can be especially valuable for professionals who may have focused on career growth or business development in their early years and now want to accelerate their retirement savings.
How Do I Set Up a Mega Backdoor Roth?
Setting up a mega backdoor Roth IRA conversion isn’t as simple as checking a box. Here’s what you need to know for effective retirement planning:
- Check your employer or HR department: Not all 401(k) plans allow for this strategy. Your plan must allow:
- After-tax contributions (beyond the regular pre-tax/Roth limit)
- In-service distributions or in-plan Roth conversions
- Understand why some plans may not offer this option: Some employers don’t allow for mega backdoor Roth conversions in their 401(k) plans due to administrative complexity and potential issues with IRS non-discrimination testing requirements. These testing rules ensure retirement plans don’t unfairly benefit highly compensated employees over other workers, which can be a challenge for companies where mostly executives would use the mega backdoor Roth strategy.
- Consider the timing: The IRS doesn’t limit how often you can do a mega backdoor Roth conversion. Depending on your plan, you might be able to take advantage of this strategy multiple times per year, making the mega backdoor Roth an even more attractive option for building tax-free retirement savings.
- Consult with a financial advisor: The mega backdoor Roth involves important tax considerations and timing strategies. Working with a retirement planning professional in San Diego, like the advisors at Blankinship & Foster, can help ensure you complete the strategy correctly and maximize its benefits.
Maximize Your Retirement Savings with a Mega Backdoor Roth: Contact Blankinship & Foster Today!
At Blankinship & Foster, our team of CERTIFIED FINANCIAL PLANNER® professionals specializes in helping high-income San Diego professionals optimize their retirement planning strategies. We understand the complexities of mega backdoor Roth IRA conversions and can help determine if this approach aligns with your overall financial plan.Contact our financial planners in San Diego today for a complimentary consultation to explore how we can help you achieve clarity, confidence, and direction in your retirement planning journey with strategies like the mega backdoor Roth conversion.