Learn how to maximize your tax-free retirement savings using the Mega Backdoor Roth strategy in 2025.
Quickly explore Mega Backdoor Roth below.
What is a Mega Backdoor Roth?
A Mega Backdoor Roth allows you to contribute after-tax dollars to your 401(k) beyond the standard limit, and then convert those funds to a Roth 401(k) or Roth IRA. In 2025, you can save up to $66,000 (or $73,500 if 50+) including employer match and after-tax contributions.
Who Should Use a Mega Backdoor Roth?
This strategy is ideal for high-income earners who have already maxed out traditional retirement accounts and want to invest more in a tax-free account.
Contribution Limits for 2025
In 2025, the 401(k) contribution limit is $66,000 ($73,500 for age 50+). This includes employee deferrals, employer match, and after-tax contributions.
Requirements for a Mega Backdoor Roth
Your 401(k) plan must allow:
- After-tax contributions
- In-plan Roth rollovers or In-service withdrawals to a Roth IRA
How to Execute a Mega Backdoor Roth
1. In-Plan Roth Rollover: Converts after-tax contributions into Roth 401(k) within the plan.
2. In-Service Withdrawal: Transfers after-tax funds to a Roth IRA, ideally as soon as possible to avoid taxable earnings.
Why Timing Matters
Delaying conversion may result in taxable earnings on your after-tax contributions. Early conversion minimizes taxes and maximizes growth.
Is a Mega Backdoor Roth Right for You?
If your plan allows it and you've maxed out other accounts, the Mega Backdoor Roth is a smart way to grow your retirement savings tax-free in 2025.
