Most people know the drill: max out your 401(k) at $23,000 in 2024, maybe toss $7,000 into an IRA, and call it a day.
But there's a lesser-known move that lets high earners pump tens of thousands more into tax-free growth—and it doesn't require a new account or a trip to a financial advisor who charges by the hour.
It's called the mega backdoor Roth, and it's been legal since 2014.
Your employer's 401(k) plan has to allow it.
Roughly half of large plans now do, according to retirement industry surveys, up from a sliver a decade ago.
The IRS caps total 401(k) contributions—you plus your employer—at $69,000 for 2024, or $76,500 if you're 50 or older.
Your own elective deferrals max out at $23,000.
But the gap between that and the overall limit can be filled with after-tax dollars, then converted to Roth.
That gap can be more than $40,000 for someone whose employer kicks in a modest match.
First, your plan must permit after-tax contributions beyond the standard pre-tax or Roth deferrals.
Second, it must allow in-service conversions or rollovers—moving that after-tax money into a Roth 401(k) or Roth IRA while you're still working.
Roth money grows tax-free and comes out tax-free in retirement, assuming you follow the rules.
For someone who expects higher tax rates later—or just wants a bigger tax-free bucket—it's a way to move serious money into that category without income limits.
Regular Roth IRA contributions phase out for single filers above $161,000 and married couples above $240,000 in 2024.
The mega backdoor has no such income cap.
If you convert after-tax dollars that have already earned a little interest, that growth is taxable.
Many plans let you convert immediately after each paycheck, which keeps the taxable piece near zero.
Some plans only allow one conversion a year, which means more taxable growth piles up.
Check your plan's summary description or call HR—it's usually spelled out in a few paragraphs.
If your 401(k) charges 1% annually and you'd rather use a low-cost IRA, the math can shift.
Run your own numbers before assuming the Roth side wins.
And if you're decades from retirement, tying money up in a Roth 401(k) means required minimum distributions kick in at 73 unless you roll it to a Roth IRA first.
That's a detail worth handling while you're still employed.
If you're struggling to hit the $23,000 deferral limit, this isn't your next step.
But if you've maxed the basics, have cash sitting in a taxable brokerage account, and your plan allows it, the mega backdoor Roth is one of the few remaining ways to shelter a five-figure sum from future taxes. **The bottom line:** This strategy rewards people who read their plan documents and act before year-end.
It's not glamorous, but the tax savings can compound into real money over 20 or 30 years.
Final Thoughts
If your plan offers it, ignoring it is leaving a valuable tool on the table.