How it works
The mega backdoor Roth exploits the gap between the employee DEFERRAL limit everyone knows and the far larger overall 415(c) ceiling that includes employer money and after-tax contributions. Where a plan permits after-tax contributions plus either in-plan Roth conversion or immediate rollovers, salary beyond your normal deferral can flow into the plan, get taxed once on the way in, and land in your Roth stack — potentially tens of thousands of extra tax-advantaged dollars a year for high savers. Room equals the overall limit minus deferrals, minus employer contributions, minus after-tax money already in; this checker computes the remainder in yearly and monthly terms and translates the effort into total-savings-rate percentages. Three plan features must coexist — after-tax contributions allowed, a conversion mechanism, and no lower internal cap — so verifying the summary plan description comes before any payroll change. Limits shown here are user-entered illustrations; pull the live figures each January. Earnings that accumulate on unconverted after-tax money come back out taxable, which is why automation matters as much as eligibility.
Formula
Room = overall limit − employee deferral − employer money − after-tax contributed | Monthly pace = room ÷ months left
Tips
- Confirm three plan features: after-tax allowed, in-plan conversion or instant rollover, no internal cap.
- Automate conversions at payroll frequency so earnings never build a taxable tail.
- Max the regular deferral FIRST — it has better tax treatment than after-tax money.
- Recalculate room each January; limits and matches reset and rarely match your assumptions.
- Watch true-up provisions — front-loading deferrals can forfeit match without them.
Frequently asked questions
- What is the mega backdoor Roth contribution limit?
- It is whatever remains under the overall 415(c) limit — often around $72,000 including everything — after employee deferrals, employer money and after-tax amounts. On the defaults used here ($24,500 + $6,000 + $10,000 in), about $31,500 of room remains for additional after-tax dollars.
- How is the mega backdoor Roth different from a regular backdoor Roth?
- A regular backdoor Roth sneaks high earners through an IRA with nondeductible contributions and conversion; the mega version lives inside a workplace 401(k) using after-tax contributions well above the deferral limit. The mega path needs specific plan features; the regular path mostly needs no conflicting IRA balance.
- Do after-tax 401(k) contributions get taxed twice?
- Not if converted promptly. You pay income tax as wages anyway; anything earned BEFORE conversion comes back out taxable. A 5% earnings tail on $30,000 of after-tax money means $1,500 taxed twice — same-payroll conversions keep that taxable tail at essentially zero.
- Can my employer block the mega backdoor Roth?
- Yes, silently. If the plan lacks after-tax contributions or a conversion mechanism, or caps total contributions below the roughly $72,000 legal ceiling, the strategy simply does not exist there. Read the summary plan description or ask the administrator before touching payroll elections.
- Is mega backdoor Roth money worth it versus taxable investing?
- Generally yes by a wide margin: the same dollars compound without annual dividend and capital-gains taxes and emerge qualified-tax-free, where a taxable account leaks yearly. Liquidity differs — Roth earnings lock until 59½ under most rules — so keep nearer-term goals outside the plan.