Maxing the Mega Backdoor Roth
If you’re a high-income tech professional who has already maxed out the regular contribution to your 401(k) plan, the Mega Backdoor Roth strategy could allow you to save tens of thousands of dollars more each year and have that money grow tax-free.
For 2026, your total contribution limit to a 401(k) plan, including any employer-matching contributions, is $72,000, or $80,000 if you’re age 50 or older. That’s well above the regular employee contribution limit of $24,500, or $32,500 if you’re age 50 or older. Using the Mega Backdoor Roth strategy, in eligible plans, you can save up to an additional $47,500 above the regular contribution limit, a portion of which may be converted to a Roth 401(k) that generally won’t be taxed when you take the money out in retirement if qualified distribution requirements are met.
And if you’re between ages 60 and 63, a SECURE 2.0 “super catch-up” provision allows you to contribute even more, up to $11,250 in additional catch-up contributions for 2026, bringing your total combined limit up to $83,250.
How Does the Mega Backdoor Roth Technique Work?
The Mega Backdoor Roth technique allows you to not only save more, but to have money grow tax-free. With the Mega Backdoor Roth, you can contribute above the regular contribution limit and also save that money as a Roth 401(k), which, in addition to growing tax-free, won’t be taxed when you take the money out in retirement. That’s different from regular pretax 401(k) contributions that aren’t taxed as they grow, but are taxed as ordinary income when you take the money out in retirement.
The amount of savings you should distribute between pretax account types (e.g., IRA, regular pretax 401[k]) and after-tax account types (e.g., Roth IRA, Roth 401[k], after-tax IRA) depends on many factors, including your current tax situation.
The Mega Backdoor Roth technique is popular with people who have high income, have already contributed the maximum regular amount to their 401(k) plan, and are looking for an additional way to save. These high-income earners also probably aren’t able to contribute to a Roth IRA account because of income limits, and a Roth 401(k) is one of the few ways to get money into Roth-type accounts.
How Do You Know If Your Company Offers a Mega Backdoor Roth?
It’s important to know that Mega Backdoor Roth is financial slang. You won’t see it described this way on your company’s 401(k) website, and not every company’s 401(k) plan has the features needed to allow you to use it. To determine if it’s an option for you, you’ll want to look at the company’s 401(k) website for these three features:
- Roth 401(k): The plan must allow the Roth 401(k) savings type.
- After-tax contributions: The plan must allow you to make after-tax contributions, in addition to the regular pretax contributions that you’re more familiar with.
- In-plan Roth conversion: The plan must allow you to convert your after-tax contributions to Roth 401(k) savings inside the plan, preferably automatically.
Starting in 2026, there’s another reason to make sure your plan offers Roth 401(k): if you earned more than $150,000 in FICA wages in the prior year, all of your catch-up contributions must be made on a Roth basis. If your plan doesn’t offer a Roth option, you won’t be able to make catch-up contributions at all.
Not all 401(k) plans offer this set of features. Leading tech companies that may offer one or more of these features include Apple, Nvidia, Cisco, Google, Intel, Meta, Microsoft, PayPal, and ServiceNow. (If you’re unsure of whether your company plan offers the required features, we can help you figure this out as part of an overall financial planning conversation.)
In-plan Roth conversion comes in two main forms: manual and automatic. The manual version requires you to go into the 401(k) website every pay period and manually convert your after-tax contributions to Roth 401(k). That can be a serious hassle, and most people won’t remember to do it.
If you don’t convert the after-tax contributions to Roth 401(k) right away with each pay period, the after-tax contribution will grow in value (usually, if your investments are increasing in value), and when you convert to Roth 401(k), you may owe tax on this increase at your applicable ordinary income tax rate for that year.
How Do You Set Up a Mega Backdoor Roth in Your 401(k) Plan?
If your company’s 401(k) plan has automatic in-plan conversion, you’re in luck. With the automatic feature, your after-tax contributions are converted to Roth 401(k) automatically after each pay period, and you don’t need to do anything.
If your 401(k) plan doesn’t have this feature, you should request it from your human resources or employee benefits team at work. These are pretty obscure features, and not all companies are aware of them or how useful they can be for employees.
Why Should You Consider a Mega Backdoor Roth?
While “Maxing the Mega” can be a good strategy for some people, it’s not for everyone. First, you need to have enough income and extra savings capacity to go beyond the regular contribution limits. If you’re not maxing out the regular contribution yet, you’re not ready for the Mega Backdoor Roth.
Second, you won’t be able to access this money in most cases until you are 59½ years old. This is long-term savings for retirement. If you’re saving up money to buy a home or have another short-term savings goal, you should not direct your extra savings into a Roth 401(k) because you won’t be able to get access to it to use for near-term financial needs. This money is locked up. It becomes illiquid for you.
Contributions to 401(k) plans must be made through paycheck deductions. With the high contribution limits using the Mega Backdoor Roth technique, it can take many paychecks to max out the contribution limit. It’s best to start early in the year.
If you’re trying to catch up and get as much as possible into the Mega Backdoor Roth this year, you may need to direct a large portion of your remaining paychecks into this strategy to hit the maximum for the year. To do that, you will need to increase your 401(k) contribution amount, perhaps substantially. In practice, that may mean dipping into your savings to cover living expenses because your paycheck will be a lot smaller. In effect, you’ll be transferring money from savings or brokerage accounts to your Roth 401(k) account. It’s a clever approach to boosting your tax-free savings, but again, it’s not for everybody.
Savant Wealth Management provides holistic wealth management services including financial planning, equity compensation planning, investment management, tax planning, and others, on a fee-only basis and as a fiduciary, acting in clients’ best interests. If you’d like help understanding the Mega Backdoor Roth and whether it makes sense for you, schedule a complimentary consultation.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment or tax advice from Savant. Please consult your investment or tax professional regarding your unique situation.
Bruce R. Barton
Managing Partner / Financial Advisor
CFP®, CFA®, MBA