Backdoor Roth IRAs and Mega Backdoor Roth 401(k)s
How high earners can access tax-free retirement growth through backdoor Roth strategies.
You may know that you can save up to $8,600 per year into a Roth IRA, but what about income limits? What if there were a way to save up to $72,000 per year into Roth accounts, regardless of income? Let’s look at the backdoor Roth IRA and the mega backdoor Roth 401k.
Understanding the Backdoor Roth IRA
Contributions to Roth accounts do not immediately lower your tax liability. However, Roth accounts grow completely tax-free as long as you don’t touch that growth until you’re 59.5, which can significantly lower your lifetime taxes.
Having a Roth account enables you to minimize taxes when you stop working, since you can cherry-pick where retirement income comes from.
A Roth IRA can be opened at any financial institution, and for 2026, you can contribute up to $7,500 per year plus another $1,100 if you’re over 50. The catch is, your income cannot exceed $165,000 if you’re single, or $246,000 combined if married.
The workaround is a backdoor Roth IRA. This simply means that you contribute to a traditional IRA, which has no income limits, and then a short time later convert the account to a Roth IRA.
One caveat about the backdoor Roth IRA: I don’t recommend them if you have an existing IRA with pre-tax money in it, such as a rollover IRA from a previous employer’s 401k, due to IRA pro-rata rules. But if you don’t have a rollover IRA, then there is no issue.
Roth 401(k)s
A much easier way to save money tax-free is by putting some of your employer 401(k) contributions into the Roth bucket—there are no income limits, and your employer will automatically stop contributions when you hit the dollar limit.
The overall dollar limit on normal 401k contributions for 2026, for traditional and Roth combined, is $24,500, plus catch-up contributions if you’re over 50. Here’s what you may not know: the IRS’ overall limit on tax-advantaged contributions is $72,000, which includes the normal $24,500 limit, catch-up contributions, employer matches, and mega backdoor Roth contributions.
Mega Backdoor Roth Accounts
Some 401(k) plans offer what’s called mega backdoor Roth accounts—the official name is “after-tax 401(k) contributions”—that allow you to max out the $72,000 overall limit.
For example, a 50-year-old who makes $200,000 maxes out her 401(k) and has a 3% employer match will contribute $24,500 + $8000 catch-up + $6,000 employer match, totaling $38,500. She could contribute an additional $33,500 to her retirement account by simply putting a percentage in the “after-tax” box within her 401(k) portal—17% in this case. This account is then automatically converted to a Roth account.
There are no income limits and no issues if you have pre-tax money anywhere.
Key Considerations and Potential Risks
If you’re fortunate enough to have this level of savings, it is possible that using a regular investment account would make more sense since you can use that money anytime—but you would pay taxes on investment income every year, unlike a Roth.
The Bottom Line
If you have access to mega backdoor Roth accounts through your employer’s 401(k), this could be the way to go for tax-free growth. There are no income limits, no pro-rata rules, and you can contribute a lot more. If not, a backdoor Roth IRA is your best option.
