Ever wondered how to get more than $7k a year into a Roth? It might sound impossible, but with the Mega Backdoor Roth, you can contribute far more than the standard limits, giving your retirement savings a serious boost.
In 2025, the Roth IRA contribution limit remains $7,000 (or $8,000 if you’re over 50). But the Mega Backdoor Roth allows you to contribute up to $70,000 to your 401(k) in 2025 and move after-tax dollars into your Roth IRA, unlocking a whole new level of retirement savings.
What Exactly is a Mega Backdoor Roth?
The Mega Backdoor Roth is a strategy that allows high earners to contribute more than the standard limits to a Roth IRA by first contributing after-tax dollars to a 401(k) and then rolling those over into a Roth IRA. Here’s a step-by-step breakdown of how it works:
Max out your regular 401(k) contributions: In 2025, you can contribute $23,500 (or $31,000 if you're 50+) to your pre-tax or Roth 401(k). This is the first part of your retirement savings, and they are employee contributions.
Add after-tax contributions: Once you’ve hit the $23,500 (or $31,000) limits for regular contributions, you can still make after-tax contributions to your 401(k) plan. In 2025, the total contribution limit for 401(k) accounts—including employer contributions—is $70,000 (or $77,500 for those 50+).
Roll over the after-tax dollars into a Roth IRA: After making those after-tax contributions to your 401(k), you can roll them over into a Roth IRA, where they will grow tax-free.
The result? You could potentially contribute up to $70,000 into a Roth IRA in 2025, far exceeding the normal Roth contribution limit of $7,000 (or $8,000 for those over 50).
Why Should You Use the Mega Backdoor Roth?
Here’s why the Mega Backdoor Roth is such a powerful tool for retirement:
Much higher contribution limits: In 2025, you can contribute up to $70,000 to your 401(k), which includes both pre-tax or Roth contributions, plus any after-tax contributions you make. That’s a huge increase over the $7,000 Roth IRA limit. If you’re looking to accelerate your retirement savings, this is an incredible strategy.
Tax-free growth: Any contributions rolled into the Roth IRA will grow tax-free, meaning you won’t pay taxes when you withdraw them in retirement. For high earners, this is a great way to keep more of your money working for you.
No income limits: Unlike regular Roth IRAs, which have income restrictions, the Mega Backdoor Roth is open to anyone, regardless of income. This is particularly useful if your income is too high to qualify for a regular Roth IRA contribution.
Things to Watch Out For
While the Mega Backdoor Roth is a great strategy, it’s not without its caveats. Here are some things to keep in mind:
Not all 401(k) plans allow after-tax contributions: For the Mega Backdoor Roth to work, your employer’s 401(k) plan must allow after-tax contributions. Some plans may not offer this option, so you’ll need to check with your HR department or plan administrator to see if it's available.
Not all plans allow "in service distributions": Essentially, some plans only allow you to roll money out of the plan if you've left that employer.
Rolling over to a Roth IRA can be tricky: When you roll over after-tax contributions to a Roth IRA, there are certain rules to follow. You’ll want to move the money promptly to avoid taxes on any earnings that accumulate in your 401(k) before the rollover happens.
Timing is important: You’ll want to roll over the after-tax contributions into your Roth IRA as quickly as possible. The longer you wait, the more likely any earnings on those after-tax dollars will be taxed when you do the rollover.
How to Get Started with a Mega Backdoor Roth
If you’re interested in using the Mega Backdoor Roth strategy to supercharge your retirement savings, here’s what you should do:
Check if your 401(k) allows after-tax contributions: You’ll need to confirm that your 401(k) plan allows after-tax contributions. If it doesn’t, this strategy won’t be an option for you.
Max out your pre-tax or Roth 401(k) contributions: For 2025, that means contributing $23,500 (or $31,000 if you're 50+). Once you’ve hit that limit, you can move on to the next step.
Make after-tax contributions: If your plan allows for it, contribute after-tax dollars to your 401(k), up to the total 401(k) limit of $70,000 (or $77,500 if you're 50+).
Roll over the after-tax contributions into a Roth IRA: This is the key step that makes the Mega Backdoor Roth work. You’ll want to roll those after-tax contributions into your Roth IRA so that they can grow tax-free.
Consult a financial planner: Because the Mega Backdoor Roth is a complex strategy, it’s always a good idea to work with a financial planner who understands how to navigate it properly. They can help ensure that everything is set up correctly and that you're maximizing your retirement savings in the best way possible.
Conclusion
The Mega Backdoor Roth is one of the best strategies for high earners who want to maximize their Roth IRA contributions and enjoy tax-free growth in retirement. With the right 401(k) plan, you can contribute up to $70,000 in 2025, far more than the standard Roth IRA limit, giving you an incredible opportunity to supercharge your retirement savings.
If you’re ready to supercharge your retirement savings or have questions about how this strategy can work for you, let’s chat. At WealthBound Advisors, we specialize in helping you navigate complex retirement planning strategies like the Mega Backdoor Roth.
Disclaimer: None of this should be seen as advice. This is all for informational purposes. Consult your legal, tax, and financial team before making any changes to your financial plan.: