For those who earn an income that makes them ineligible to contribute to a Roth IRA, a mega backdoor Roth IRA may be an effective tool to help them save for retirement, and also get a potential tax break in their golden years.
Only a certain type of individual will likely choose to employ a mega backdoor Roth IRA as a part of their financial plans. And there are a number of conditions that have to be met for mega backdoor Roth to be possible.
Read on to learn what mega backdoor Roth IRAs are, how they work, and the important details that investors need to know about them.
Key Points
• A mega backdoor Roth IRA allows high earners to save for retirement with potential tax benefits, despite income limits on traditional Roth IRAs.
• This strategy involves making after-tax contributions to a 401(k) and then transferring these to a Roth IRA.
• Eligibility for a mega backdoor Roth depends on specific 401(k) plan features, including the allowance of after-tax contributions and in-service distributions.
• Contribution limits for 401(k) plans in 2024 and 2025 allow for significant after-tax contributions, enhancing the potential retirement savings.
• The process, while beneficial, can be complex and may require consultation with a financial professional to navigate potential hurdles.
What Is a Mega Backdoor Roth IRA?
The mega backdoor Roth IRA is a retirement savings strategy in which people who have 401(k) plans through their employer — along with the ability to make after-tax contributions to that plan — can roll over the after-tax contributions into a Roth IRA.
But first, it’s important to understand the basics of regular Roth IRAs. A Roth IRA is a retirement account for individuals. For both tax year 2024 and tax year 2025, Roth account holders can contribute up to $7,000 per year (or $8,000 for those 50 and older) of their post-tax earnings. That is, income tax is being paid upfront on those earnings — the opposite of a traditional IRA.
Individuals can withdraw their contributions at any time, without paying taxes or penalties. For that reason, Roth IRAs are attractive and useful savings vehicles for many people.
But Roth IRAs have their limits — and one of them is that people can only contribute to one if their income is below a certain threshold.
In 2024 the limit is up to $146,000 for single people (people earning $146,000 up to $161,000 can contribute a reduced amount); for married people who file taxes jointly, the limit is up to $230,000 (or from $230,000 up to $240,000 to contribute a reduced amount).
In 2025 the limit is up to $150,000 for single people (people earning $150,000 up to $165,000 can contribute a reduced amount); for married people who file taxes jointly, the limit is up to $236,000 (or from $236,000 up to $246,000 to contribute a reduced amount).
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How Does a Mega Backdoor Roth Work?
When discussing a mega backdoor Roth, it’s helpful to understand how a regular backdoor Roth IRA works. Generally, individuals with income levels above the thresholds mentioned who wish to contribute to a Roth IRA are out of luck. However, there is a workaround: the backdoor Roth IRA, a strategy that allows high-earners to fund a Roth IRA account by converting funds in a traditional IRA (which has no limits on a contributors’ earnings) into a Roth IRA. This could be useful if an individual expects to be in a higher income bracket at retirement than they are currently.
Mega backdoor Roth IRAs involve 401(k) plans. People who have 401(k) plans through their employer — along with the ability to make after-tax contributions to that plan — can potentially roll over up to $46,000 in 2024, and $46,500 in 2025, in after-tax contributions into a Roth IRA. That mega Roth transfer limit has the potential to boost an individual’s retirement savings.
Example Scenario: How to Pull Off a Mega Backdoor Roth IRA
The mega backdoor Roth IRA process is pretty much the same as that of a backdoor Roth IRA. The key difference is that while the regular backdoor involves converting funds from a traditional IRA into a Roth IRA, the mega backdoor involves converting after-tax funds from a 401(k) into a Roth IRA.
Whether a mega backdoor Roth IRA is even an option will depend on an individual’s specific circumstances. These are the necessary conditions that need to be in place for someone to try a mega backdoor strategy:
• You have a 401(k) plan. People hoping to enact the mega backdoor strategy will need to be enrolled in their employer-sponsored 401(k) plan.
• You can make after-tax contributions to your 401(k). Determine whether an employer will allow for additional, after-tax contributions.
• The 401(k) plan allows for in-service distributions. A final piece of the puzzle is to determine whether a 401(k) plan allows non-hardship distributions to either a Roth IRA or Roth 401(k). If not, that money will remain in the 401(k) account until the owner leaves the company, with no chance of a mega backdoor Roth IRA move.
If these conditions exist, a mega backdoor strategy should be possible. Here’s how the process would work:
Open a Roth IRA — so there’s an account to transfer those additional funds to.
From there, pulling off the mega backdoor Roth IRA strategy may sound deceptively straightforward — max out 401(k) contributions and after-tax 401(k) contributions, and then transfer those after-tax contributions to the Roth IRA.
But be warned: There may be many unforeseen hurdles or expenses that arise during the process, and for that reason, consulting with a financial professional to help navigate may be advisable.
Who Is Eligible for a Mega Backdoor Roth
Whether you might be eligible for a mega backdoor Roth depends on your workplace 401(k) retirement plan. First, the plan would need to allow for after-tax contributions. Then the 401(k) plan must also allow for in-service distributions to a Roth IRA or Roth 401(k). If your 401(k) plan meets both these criteria, you should generally be eligible for a mega backdoor Roth IRA.
💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.
Contribution Limits
If your employer allows for additional, after-tax contributions to your 401(k), you’ll need to figure out what your maximum after-tax contribution is. The standard 401(k) contribution limit for employees to a 401(k) in 2024 is $23,000, or $30,500 for those 50 and older. For 2025, the limit is $23,500, or $31,000 for those 50 and older. (In 2025, those aged 60 to 63 can contribute up to $34,750.)
The IRS allows up to $69,000, or $76,500 for those 50 and up, in total contributions (including employer and after-tax contributions) to a 401(k) in 2024. For 2025, the total limits are $70,000, or $77,500 for those 50 and up. (The total limit for those aged 60 to 63 in 2025 is $81,250.)
So how much can you contribute in after-tax funds? Here’s an example. Say you are under age 50 and you contributed the max of $23,500 to your 401(k) in 2025, and your employer contributed $8,000, for a total of $31,500. That means you can contribute up to $38,500 in after-tax contributions to reach the total contribution level of $70,000.
Is a Mega Backdoor Roth Right For Me?
Given that this Roth IRA workaround has so many moving parts, it’s worth thinking carefully about whether a mega backdoor Roth IRA makes sense for you. These are the advantages and disadvantages.
Benefits
The main upside of a mega backdoor Roth is that it allows those who are earning too much to contribute to a Roth IRA a way to potentially take advantage of tax-free growth.
Plus, with a mega backdoor Roth IRA an individual can effectively supercharge retirement savings because more money can be stashed away. It may also offer a way to further diversify retirement savings.
Downsides
The mega backdoor Roth IRA is a complicated process, and there are a lot of factors at play that an individual needs to understand and stay on top of.
In addition, when executing a mega backdoor Roth IRA and converting a traditional IRA to a Roth IRA, it could result in significant taxes, as the IRS will apply income tax to contributions that were previously deducted.
The Future of Mega Backdoor Roths
Mega backdoor Roths are currently permitted as long as you have a 401(k) plan that meets all the criteria to make you eligible.
However, it’s possible that the mega backdoor Roth IRA could go away at some point. In prior years, there was some legislation introduced that would have eliminated the strategy, but that legislation was not enacted.
The Takeaway
Strategies like the mega backdoor Roth IRA may be used by some investors to help achieve their retirement goals — as long as specific conditions are met, including having a 401(k) plan that accepts after-tax contributions.
While retirement may feel like far off, especially if you’re early in your career or still relatively young, it’s generally wise to start thinking about it sooner rather than later.
Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
FAQ
Are mega backdoor Roths still allowed in 2025?
Yes, mega backdoor Roths are still permissible in 2025.
Is a mega backdoor Roth worth it?
Whether a mega backdoor Roth is worth it depends on your specific situation. It may be worth it for you if you earn too much to otherwise be eligible for a Roth IRA and if you have a 401(k) plan that allows you to make after-tax contributions.
Is a mega backdoor Roth legal?
Yes, a mega backdoor Roth IRA is currently legal.
Are mega backdoor Roths popular among Fortune 500 companies?
A number of Fortune 500 companies allow the after-tax contributions to a 401(k) that are necessary for executing a mega backdoor Roth IRA.
What is a super backdoor Roth?
A super backdoor Roth IRA is the same thing as a mega backdoor Roth IRA. It is a strategy in which people who have 401(k) plans through their employer — along with the ability to make after-tax contributions to that plan — can roll over the after-tax contributions into a Roth IRA.
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