The Mega Backdoor Roth is one of the most powerful tax loopholes available to high-income earners. In 2025, it lets you contribute up to $70,000—and in some cases, over $80,000—into a Roth account. That’s 10x what a traditional Roth IRA allows.
If you’re familiar with Roth IRAs, you know the contribution limit in 2025 is just $7,000 ($8,000 if you’re over 50) and subject to income limits. The Mega Backdoor Roth bypasses all of that.
As long as your employer-sponsored 401(k) plan is structured correctly, you can take full advantage of this strategy. Here’s how it works.
Mega Backdoor Roth Eligibility
To implement the Mega Backdoor Roth, your 401(k) plan must allow:
- After-tax contributions (distinct from Roth contributions), and
- In-service Roth conversions or in-service distributions to a Roth IRA
If your plan doesn’t allow for both, unfortunately, this strategy won’t work.
Pre-Tax, Roth, and After-Tax: The 3 Types of 401(k) Contributions
To pull this off, you need to understand the difference between the three types of contributions allowed in many 401(k) plans:
- Pre-Tax
The traditional 401(k) option. You get a tax deduction now, and pay tax when you withdraw the money later.
- Roth
You contribute after-tax dollars, and both your contributions and earnings grow and come out tax-free in retirement.
- After-Tax (the key to the Mega Backdoor Roth)
You contribute after-tax dollars like Roth, but here’s the difference:
Your contributions can be converted to Roth, but the growth is taxable if left alone. That’s why the conversion step is crucial.
Not every 401(k) plan allows for after-tax contributions, so you’ll need to check with your plan administrator.
2025 401(k) Contribution Limits
Here are the updated IRS limits for 2025:
- Employee contribution limit (pre-tax or Roth): $23,500
- Catch-up contribution (age 50+): $7,500
- NEW catch-up for age 60–63: Up to $11,250 (if plan allows)
- Total 401(k) limit (employee + employer + after-tax): $70,000
- With age 50+ catch-up: $77,500
- With special 60–63 catch-up: $81,250
Example:
Let’s say you’re under age 50, and your employer offers a match:
- You contribute: $23,500
- Your employer contributes: $5,000
- That leaves $41,500 in room for after-tax contributions
- Total: $70,000
Once you convert that $41,500 to Roth, you now have a massive amount growing tax-free.
How to Execute a Mega Backdoor Roth
Let’s walk through the steps:
- Max out your employee contribution — $23,500 in 2025
- Get your employer match — say $5,000
- Make after-tax contributions — up to the IRS limit of $70,000 total
- Convert the after-tax portion (ideally immediately) to a Roth 401(k) or Roth IRA
After the conversion, your Roth account now includes:
- $23,500 employee contribution (if done as Roth)
- $41,500 after-tax conversion
- Possibly even more if converting employer match (more on that next)
Going All-In: Maxing Out Roth Contributions
If you really want to stack your Roth:
- Elect Roth 401(k) for your employee contributions
- Convert after-tax contributions to Roth immediately
- Convert employer match to Roth (note: this is taxable)
Tax Tip:
Employer matches are made with pre-tax dollars, so converting them triggers ordinary income tax. To make this worth it, use money from outside your 401(k)—like from a taxable brokerage account—to cover the tax bill.
Tax Considerations and Pitfalls
Let’s say you contribute $25,000 in after-tax money and it grows to $27,000 before you convert.
You’ll owe income tax on the $2,000 of earnings at the time of conversion.
To minimize the tax hit:
- Convert frequently (monthly or quarterly)
- If possible, automate your in-plan Roth conversions
Be Strategic With Funding
One mistake we see often: front-loading after-tax contributions and accidentally squeezing out your employer match.
Example:
- You contribute $23,500
- You put in $45,000 of after-tax
- That’s $68,500 of your $70,000 total limit
- Now your employer can only contribute $1,500 instead of their full $5,000 match
That’s $3,500 in free money left on the table.
Make sure you leave space for your employer contributions before maxing out your after-tax bucket.
Who Should Consider a Mega Backdoor Roth?
This strategy is best suited for:
- High-income earners who’ve already maxed out IRAs and HSAs
- People with cash flow to contribute $60K+ per year
- Folks who can pay tax on conversions out of pocket
- Those in their peak earning years looking to build future tax-free income
Also, if you’re age 60–63 and eligible for the special catch-up, this is one of the most powerful ways to front-load tax-free retirement money before RMDs kick in.
Final Thoughts
While it’s still allowed, the Mega Backdoor Roth is an incredible planning tool for high earners—especially with the added flexibility from the 2025 contribution and catch-up increases.
But don’t rush in without a plan. You need to:
- Understand your plan’s rules
- Time your contributions to avoid missing employer matches
- Make smart decisions around taxes and liquidity
If you want help figuring out if this fits into your overall financial picture, reach out to us at. We’ll walk through your plan, your income, and your goals—and help you figure out if this strategy makes sense.
This information is general education only and is not to be construed as specific tax, legal or investment advice.
