Mega Backdoor Roth IRA Strategy

Maximize your Roth retirement savings beyond standard contribution limits

The Mega Backdoor Roth is an advanced retirement strategy that allows high-income earners to contribute significantly more to their Roth accounts than standard contribution limits would normally allow.

This strategy is particularly valuable for self-employed individuals with Solo 401k plans that permit after-tax contributions and in-plan Roth conversions.

How the Mega Backdoor Roth Works

The Mega Backdoor Roth strategy takes advantage of two key features:

The ability to make after-tax (non-Roth) contributions to a 401k
The ability to convert those after-tax contributions to Roth

This strategy allows you to potentially contribute up to an additional $46,500 (for 2025) beyond the standard employee and employer contribution limits to your Roth retirement savings.

Solo 401k Contribution Limits (2025)

Employee Elective Deferrals:

$23,500 ($31,000 if age 50+)

Employer Contributions:

Up to 25% of compensation

Total Contribution Limit:

$70,000 ($77,500 if age 50+)

Potential Mega Backdoor Roth Space:

Up to $46,500 (total limit minus employee/employer contributions)

Requirements for the Mega Backdoor Roth

Required Plan Features

Your Solo 401k plan must allow:

After-tax contributions (beyond pre-tax and Roth)
One of the following:

In-plan Roth conversions (direct conversion to Roth 401k)
In-service distributions (allows rolling after-tax funds to a Roth IRA)

Important Note

Most free prototype Solo 401k plans from major brokerages don't offer the necessary features for the Mega Backdoor Roth. Custom Solo 401k plans from third-party administrators typically provide the required options.

Step-by-Step Process

Step 1: Max Out Regular Contributions

First, maximize your standard employee contributions ($23,500 in 2025, or $31,000 if age 50+). You can choose traditional pre-tax or Roth for these contributions.

Step 2: Make Employer Contributions

As both employer and employee, make your profit-sharing contribution (up to 25% of compensation, to a maximum of $69,000 total combined with Step 1).

Step 3: Make After-Tax Contributions

Contribute additional funds as after-tax (non-Roth) contributions up to the annual limit ($69,000 or $76,500 if age 50+ for 2025).

Step 4: Convert to Roth

Convert your after-tax contributions to Roth using one of these methods:

In-plan Roth conversion (if your plan allows it)
In-service distribution to roll after-tax funds into a Roth IRA

Ideally, convert as soon as possible after making the after-tax contribution to minimize taxable earnings.

Tax Considerations

Benefits of the Mega Backdoor Roth

Significantly increases your Roth retirement savings beyond normal limits
Allows high-income earners to access Roth benefits despite income restrictions
Creates tax-free growth and withdrawals in retirement
No required minimum distributions (RMDs) from Roth IRAs during your lifetime
Provides tax diversification in retirement

Finding a Compatible Solo 401k Provider

Most custom Solo 401k providers offer plans that support the Mega Backdoor Roth strategy. These providers typically charge setup and annual maintenance fees but offer greater flexibility than free brokerage plans.

When evaluating providers, specifically ask about:

After-tax contribution options
In-plan Roth conversion capabilities
In-service distribution rules
Any additional fees for these features