There's a retirement account trick that lets you stash up to $69,000 a year in tax-advantaged savings, and it has nothing to do with being rich.
It's called the mega backdoor Roth, and it's quietly sitting inside a surprising number of workplace 401(k) plans.
The regular 401(k) contribution limit for 2024 is $23,000, plus a $7,500 catch-up if you're 50 or older.
The total cap on all contributions to a 401(k)—including employer matches—is $69,000 for 2024, or $76,500 with catch-up.
The gap between those two numbers is where the magic happens.
After you max out your regular pre-tax or Roth 401(k) contributions, some plans let you make additional "after-tax" contributions.
That money doesn't get a tax break going in, but your plan may let you convert it to Roth dollars—either instantly or when you leave the job.
Once converted, the money grows tax-free and comes out tax-free in retirement.
The catch is that not every employer offers this.
You need a plan that allows after-tax contributions and either in-plan Roth conversions or in-service withdrawals.
According to retirement researchers, only about a quarter of 401(k) plans offer this feature, and even fewer employees know to ask about it.
So the first move is simple: log into your 401(k) portal or email HR and ask whether your plan allows after-tax contributions and in-plan Roth conversions.
If the answer is yes, the strategy is straightforward.
Then convert those after-tax dollars to Roth as fast as your plan allows.
The sooner you convert, the less tax you'll owe on any gains, because gains on after-tax dollars are taxable until converted.
Why bother when you could just use a Roth IRA?
Because Roth IRA contributions are capped at $7,000 a year for 2024.
The mega backdoor Roth has no income limit and lets you pile in tens of thousands more—money that grows tax-free for decades.
If you convert after-tax money that has already grown, you'll owe income tax on those gains.
Some plans only allow one conversion per year.
And if you're chasing a big goal like a house down payment in the next few years, locking money into a Roth 401(k) may not make sense, since withdrawals before 59½ can trigger penalties.
This is one to run past a tax professional before you pull the trigger. **The Bottom Line** The mega backdoor Roth isn't a gimmick for hedge fund managers—it's a legitimate feature hiding in plain sight in many workplace plans.
Most people never ask, which means most people never use it.
Final Thoughts
A five-minute email to your benefits team could be the highest-paid five minutes of your financial life.