The Backdoor Roth and Mega Backdoor Roth

The Backdoor Roth and Mega Backdoor Roth are maneuvers designed to maximize the amount that you can contribute to your retirement accounts. g

The key difference in the two is that the Backdoor Roth happens inside of an IRA and the Mega Backdoor Roth happens inside of a 401(k)*. Both involve contributing post-tax/after-tax dollars to their retirement account, and then converting those dollars to a Roth account. So, for the Backdoor Roth, funds are contributed to a 

It should also be noted that for the 401(k) contribution, the Mega Backdoor Roth, the contribution must take place in a special “voluntary after-tax” account, not to be confused with a Roth account. The funds are then converted to a Roth 401(k).

How to do a Backdoor Roth or Mega Backdoor Roth

Backdoor Roth

1. Non-deductible contribution to a traditional IRA
2. Conversion to a Roth IRA

Mega Backdoor Roth

1. Contribution to a voluntary after-tax 401(k) account
2. Conversion to a Roth 401(k) account (if the plan allows in-service or in-plan rollovers, 

Why do a Backdoor Roth or Mega Backdoor Roth

The main benefit of a pre-tax IRA contribution is tax deferral. You contribute to your IRA now, the funds generate earnings, and you don’t pay taxes on the contribution or earnings until you start taking distributions.

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IRA contributions generally aren’t made through payroll deductions, which means the money you contribute has already been taxed. Because the contribution doesn’t reduce your taxable wages through payroll, the only way to receive the full pre‑tax benefit is by claiming the IRA deduction on your tax return. However, IRS sets limits on the amount that you can deduct if you or your spouse participate in an And, this is where the Backdoor Roth comes in.

A Backdoor Roth would be done if you can no longer make a tax deductible traditional/pre-tax IRA contribution due to income phaseout limits set by the IRS. If your income level prevents you from making a fully-deductible pre-tax IRA contribution, you can still make a non-deductible pre-tax contribution and convert it to a Roth IRA.

The Mega Backdoor Roth earned its name from the massive contribution that the strategy enables. The standard employee deferral limit is $24,500. However, employees are allowed to make voluntary after-tax contributions up to the lesser of $72,000 (2026) or 100% of their compensation. For each plan that you participate in, your voluntary after-tax contribution limit is reduced by your employee deferrals and your employer’s contributions. For example, if you have a salary of $75,000 and contributed $24,500 as an employee deferral, you can contribute up to $47,500 to a voluntary after-tax account and then do an in-plan conversion to a Roth 401(k).