There's a retirement move that lets high earners stuff tens of thousands of extra dollars into tax-free accounts each year — and most people who qualify have never heard of it.
It's nicknamed the "mega backdoor Roth," and it has nothing to do with the well-known backdoor Roth IRA trick.
The regular backdoor Roth lets you contribute $7,000 a year ($8,000 if you're 50 or older) by converting after-tax IRA money.
The mega version is different: it taps your workplace 401(k) plan, where the total contribution limit for 2025 is $70,000 — or $77,500 if you're 50 or older.
You and your employer together can put up to that $70,000 cap into your 401(k).
If your employer matches, say, $10,000 and you defer $23,500 through normal pre-tax or Roth contributions, that leaves roughly $36,500 of room.
That leftover can go in as after-tax contributions — and then get converted to Roth, either inside the plan or by rolling it to a Roth IRA.
That converted money grows tax-free, and qualified withdrawals in retirement come out tax-free too.
Over a decade, this can mean six figures of additional tax-sheltered savings that would otherwise sit in a plain brokerage account generating taxable gains.
But there are catches worth knowing before you call HR.
First, your employer's plan has to allow after-tax contributions and either in-plan Roth conversions or the ability to roll that money out.
Second, the after-tax money has to be converted fairly quickly, because any investment earnings that pile up before conversion are taxable as ordinary income.
Third, watch the pro-rata rule if you hold a traditional IRA.
It can complicate the tax treatment of conversions and catch people off guard at filing time.
And if your plan only allows one conversion window a year, timing matters more than most people realize.
Some plans now offer automatic conversions that happen every pay period, which sidesteps the tax-on-earnings problem entirely.
If yours does, that's the cleanest setup.
If not, you'll want to convert as soon as the money lands.
This generally makes the most sense for people already maxing out their 401(k) and IRA, with cash left over.
If you're carrying credit card debt or don't have a solid emergency fund, those come first — no tax break beats a 24% interest charge.
One more thing: check whether your plan allows "spillover" contributions once you hit the regular deferral limit, or whether it cuts you off entirely.
That single plan detail determines whether this strategy is even on the table for you.
The mega backdoor Roth isn't a loophole in the shady sense — it's written into the tax code.
But it rewards people who read their plan documents and ask the right questions.
Final Thoughts
A 15-minute call to your 401(k) administrator could be the highest-paid quarter hour of your financial year.