Mega Backdoor Roth
A strategy using after-tax (non-Roth) 401(k) contributions converted to a Roth account, allowing high earners to move significantly more into Roth than the standard $23,500 deferral limit.
Detailed Explanation
The mega backdoor Roth requires three things: a 401(k) plan that allows after-tax contributions above the elective deferral limit, in-plan Roth conversions or in-service distributions to Roth IRA, and total contributions within the overall Section 415(c) limit ($70,000 for 2025 plus catch-up). Solo 401(k)s for self-employed individuals can be configured to support this. The strategy is most valuable for high earners maxing the standard 401(k) and IRA limits but wanting more tax-free retirement assets.
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Learn about Tax Planning & StrategyRelated Terms
Backdoor Roth IRA
A two-step strategy of contributing to a non-deductible traditional IRA and converting it to Roth, used by high-income earners who exceed direct Roth IRA contribution limits.
Solo 401(k)
A retirement plan for self-employed individuals and small business owners with no full-time employees, allowing both employee deferral and employer profit-sharing contributions.
Roth Conversion
The process of moving funds from a traditional pre-tax retirement account (IRA, 401(k)) to a Roth account, paying ordinary income tax on the converted amount in exchange for tax-free future growth and withdrawals.
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