Mega Backdoor Roth

The mega backdoor Roth supercharges the standard backdoor Roth by working inside a 401(k) or 403(b) plan rather than through IRAs. While the standard backdoor allows only $7,000 per year into a Roth IRA, the mega backdoor can funnel dramatically larger sums — potentially $40,000+ annually — into tax-free Roth territory, provided the plan supports the necessary features.

The mechanics rely on a two-part calculation. The overall Section 415 limit on total contributions to a 401(k) from all sources is $70,000 in 2025 ($77,500 for those 50+). After accounting for the employee's pre-tax or Roth elective deferrals ($23,500) and employer contributions (match, profit-sharing), any remaining room up to $70,000 can be filled with after-tax (non-Roth) employee contributions — if the plan allows them. These after-tax contributions have a cost basis equal to the amount contributed, but their earnings grow only tax-deferred (not tax-free).

The second required feature is either in-service withdrawals or in-plan Roth rollovers. An in-service withdrawal lets you roll the after-tax balance out of the 401(k) and into a Roth IRA while still employed; a Roth in-plan conversion lets you convert the after-tax subaccount to a Roth 401(k) subaccount without leaving the plan. Either way, only the earnings on the after-tax contributions are taxable — the principal moves to Roth status tax-free.

Not all 401(k) plans allow after-tax contributions or in-service distributions, and non-discrimination testing limits the strategy at companies where lower-compensated employees don't also participate robustly. High-income employees at major tech companies, professional firms, and large corporations are most likely to have access to plans supporting the mega backdoor Roth. Executing the strategy typically requires coordinating with the plan administrator and a CPA, as the tax reporting (Form 8606 for IRA rollovers) can be nuanced.