Mega Backdoor Roth Explained: Contribute $69,000+ to Roth
The mega backdoor Roth strategy can supercharge your Roth savings. Learn how to contribute far beyond normal limits.
Key Takeaways
- 1Mega backdoor Roth allows $69,000+ total 401(k) contributions (2024)
- 2Requires 401(k) that allows after-tax contributions AND in-service conversions
- 3After-tax 401(k) contributions converted to Roth
- 4Not all 401(k) plans allow this strategy
- 5Can add $40,000+ beyond normal 401(k) limits
- 6Check your plan documents for eligibility
- 7Future legislation could eliminate this strategy
What Is the Mega Backdoor Roth?
The mega backdoor Roth is a strategy to contribute far more to Roth accounts than normal limits allow.
- **Regular Roth IRA limit**: $7,000 (2024)
- **Mega backdoor potential**: $46,000+ additional (2024)
- **How it works**: After-tax 401(k) contributions → Roth conversion
- **Total possible**: Up to $69,000 to retirement accounts ($76,500 if 50+)
- **Tax-free growth**: Converted money grows tax-free in Roth
Beyond Normal Limits
Normal 401(k) limit is $23,000. Mega backdoor lets you add another $46,000 of after-tax money and convert it to Roth.
Mega Backdoor Roth Requirements
Your 401(k) plan must support two key features.
- **After-tax contributions**: Plan must allow contributions beyond the $23,000 pre-tax/Roth limit
- **In-service distributions OR in-plan conversions**: Must be able to move after-tax money to Roth while employed
- **Not all plans qualify**: Many don't allow one or both features
- **Check plan documents**: Or ask your HR/plan administrator
| Feature | Required? | Why |
|---|---|---|
| After-tax contributions | ✅ Yes | Source of the money |
| In-service withdrawal | ✅ Need one | Move to Roth IRA |
| In-plan Roth conversion | ✅ or this | Move to Roth 401(k) |
2024 Contribution Limits
Understanding the limits shows how mega backdoor fits in.
| Contribution Type | 2024 Limit | Notes |
|---|---|---|
| Employee pre-tax/Roth 401(k) | $23,000 | Standard limit |
| Catch-up (50+) | $7,500 | Additional if 50+ |
| Employer match | Varies | Counts toward $69,000 |
| After-tax employee | Remainder | Up to total $69,000 |
| **Total Limit** | $69,000 | $76,500 if 50+ |
Example Calculation
You contribute $23,000 pre-tax. Employer matches $5,000. Total: $28,000. Mega backdoor space: $69,000 - $28,000 = $41,000 in after-tax contributions you could convert to Roth.
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How to Execute Mega Backdoor Roth
Steps to implement this strategy if your plan allows it.
- 1Confirm your 401(k) allows after-tax contributions
- 2Confirm in-service withdrawals or in-plan Roth conversions allowed
- 3Max out your pre-tax or Roth 401(k) contributions ($23,000)
- 4Contribute additional after-tax money (up to remaining $69,000 limit)
- 5Convert after-tax contributions to Roth (in-plan or roll to Roth IRA)
- 6Convert frequently to minimize taxable gains
- 7Track basis carefully for tax reporting
Does Your 401(k) Plan Allow Mega Backdoor?
Here's how to find out if you can use this strategy.
- **Check Summary Plan Description (SPD)**: Look for "after-tax contributions"
- **Look for in-service distributions**: While still employed
- **Ask HR**: "Does our 401(k) allow after-tax contributions and in-service Roth conversions?"
- **Contact plan administrator**: Fidelity, Vanguard, etc.
- **Common at**: Tech companies, large corporations
- **Uncommon at**: Small businesses, older plans
Mega Roth Funds and Gold IRA
Money accumulated through mega backdoor Roth can eventually be diversified into Gold.
- Roth 401(k) can roll to Roth IRA when you leave employer
- Roth IRA can invest in physical gold through self-directed custodian
- Tax-free growth on gold in Roth is powerful
- No RMDs on Roth IRA during your lifetime
- Combine mega backdoor with Gold IRA for diversification
- Augusta Precious Metals offers self-directed Roth Gold IRAs
Frequently Asked Questions
1Is mega backdoor Roth going away?
There have been proposals to eliminate it, but none have passed. Like regular backdoor Roth, it could be restricted by future legislation.
2What if my plan only allows in-plan conversion, not distribution?
That works fine. Your after-tax contributions become Roth 401(k) instead of Roth IRA. You can roll to Roth IRA later when you leave.
3How often should I convert?
As frequently as your plan allows - ideally immediately after each after-tax contribution. This minimizes taxable gains on the conversion.
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