What Is a Mega Backdoor Roth? How It Works and Who It’s For
Written by
John Csiszar
Edited by
Nupur Gambhir
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What Is a Mega Backdoor Roth?
A mega backdoor Roth is a tax-planning strategy that high-earners use to shelter more money in tax-advantaged retirement accounts than the IRS allows for direct contributions. It’s also a favorite tool for those whose high incomes would otherwise preclude them from accessing Roth accounts at all.
Earning so much money that you fall outside the IRS’s threshold for tax-privileged accounts is a good problem to have. Even so, some of those who suffer from it find a solution in mega backdoor Roth conversions.
How Does a Mega Backdoor Roth Work?
A mega backdoor Roth involves making after-tax contributions to a 401(k) and then rolling them over into a Roth IRA or Roth 401(k).
The distinction is crucial because it can work only with income that the IRS has already taxed, even though traditional 401(k) contributions come from deductible pre-tax income.
The strategy is not available through all plans, nor to all people, and has potential tax implications for those who qualify.
Mega Backdoor Roth vs. Regular Roth Contributions
There are several key differences between standard Roth IRAs and mega backdoor Roth conversions.
| Features | Regular Roth | Mega Backdoor Roth |
| Income restrictions | Phase-out starts at $150,000 and eligibility ends at $165,000 for single filers or $236,000-$246,000 for joint filers. | None |
| Contribution limits | $7,000 per year, or $8,000 for those 50 and up. | $70,000 combined, including employer matches, profit sharing and deferrals. |
| Tax treatment | Roth accounts are funded with income that the IRS has already taxed, allowing for tax-free qualified withdrawals of contributions and gains. | After-tax 401(k) contributions aren’t taxed in retirement, nor are their gains once the Roth conversion is complete, which is why experts recommend converting frequently for nearly tax-free growth. |
Here’s when to consider choosing a mega backdoor Roth over a regular Roth IRA.
- You earn too much to contribute directly to a Roth IRA.
- You’ve maxed out your employer’s 401(k).
- You’ve exhausted other tax-advantaged options like maxing out a standard IRA.
- You won’t need to access the after-tax contributions until retirement.
- Your 401(k) plan allows Roth conversions.
Benefits of a Mega Backdoor Roth
A mega backdoor Roth conversion offers high earners many benefits, including:
- Access to Roth tax privileges — which after-tax 401(k) contributions don’t enjoy — despite earning too much income to contribute directly to Roth accounts.
- Tax-free withdrawals on both contributions and gains.
- Ability to shelter tens of thousands more dollars than the standard annual Roth IRA limit allows.
- No required minimum distributions.
Potential Drawbacks and Risks of a Mega Backdoor Roth
When done correctly, mega backdoor Roth conversions can shelter substantially more money than the IRS allows for direct Roth contributions while providing access to those who earn too much to contribute to Roth accounts.
However, there are some drawbacks, including:
- Limited availability — not all 401(k) plans support after-tax contributions or in-plan Roth conversions.
- Setting up and managing mega backdoor Roth conversions can be complicated.
- Errors during the rollover and conversion processes can have unforeseen tax consequences.
- The “pro rata” rule requires you to calculate all pre-tax and after-tax contributions for the IRS, which treats blended accounts uniquely and aggregates all of a taxpayer’s IRAs into one.
Mega Backdoor Roth Contribution Limits
The IRS grants mega backdoor Roth conversions a contribution extension that is generous but not unlimited.
No matter the plan or accountholder‘s income, the IRS caps combined 401(k) contributions at $70,000 in 2025. The agency adjusts the amount annually for cost-of-living increases.
The rules don’t limit after-tax contributions with a specific dollar amount as long as total contributions — including pre- and after-tax money, employee contributions, employer matches and forfeitures don’t exceed the combined limit.
Consider the following example from Rhame and Gorrell Wealth Management:
- An employee who earns $250,000 a year contributes 9.4% of her income to max out her allowable pre-tax savings, which the IRS set at $23,500 for 2025.
- Her employer matches her dollar-for-dollar up to 6% of her salary for a total of $15,000.
- The employee contributes the remaining allowable $31,500 on an after-tax basis to max out the 2025 combined limit of $70,000.
- Over time, the $31,500 in after-tax money grows to $40,500.
- When the employee conducts a mega backdoor Roth conversion, the IRS — through the pro rata rule — treats the $9,000 earned on the after-tax $31,500 as taxable, highlighting why frequent conversions are critical to avoid taxes on pre-conversion gains.
How to Set Up a Mega Backdoor Roth
If you’re not sure if a mega backdoor Roth is right for you, step one is to seek professional guidance before doing anything, which should probably be your first move, even if you are sure.
Beyond that, here’s how to conduct a mega backdoor Roth conversion.
- Check the details of your workplace 401(k) to learn if it allows for after-tax contributions.
- Confirm that your plan allows Roth conversions or rollovers.
- Make after-tax contributions up to the maximum allowable amount ($70,000 in 2025) after you reach the pre-tax maximum ($23,500 for 2025).
- Follow your plan administrator’s instructions for converting the after-tax funds to a Roth IRA. Better yet, some plans offer in-plan auto-conversions that roll the funds over into a Roth 401(k) automatically on a set schedule.
Alternatives to the Mega Backdoor Roth
Most people don’t have to worry about sheltering their leftover cash after they max out their 401(k)s or how to get Roth benefits because they earn too much to contribute directly. For them, traditional 401(k)s and IRAs offer the most direct route to deferring taxes and Roth accounts let them avoid taxation on after-tax growth.
For higher earners who don’t quite need mega backdoor Roths, standard backdoor Roths offer a far simpler and more straightforward way to accomplish similar goals. They circumvent IRS income limits on direct Roth IRA contributions by rolling over funds from traditional IRAs into Roth IRAs.
Then there are Health Savings Accounts (HSAs), which provide a unique triple advantage of tax-deductible contributions, tax-deferred growth and tax-free withdrawals.
Is a Mega Backdoor Roth Right for You?
A mega backdoor Roth might be right for you if:
- You earn more than the IRS allows for Roth accounts
- You maxed out your pre-tax 401(k) contributions
- Your 401(k) plan allows for after-tax savings and Roth conversions
- You and a professional advisor determine the tax implications justify the effort.
The strategy allows high-income earners to stuff far more money into Roth accounts than they otherwise could, where it can grow tax free for tax-free withdrawals in retirement. But it’s a complex process that can come with significant tax implications if done incorrectly.
