The ‘Mega Backdoor Roth’: A 401(k) Feature You May Not Have Considered

Hello, and welcome to Blue Chip Chats. Today we’re going to be talking about a strategy called a mega backdoor Roth and how it helps high-income earners put more dollars into their retirement plans. My name is Gina DeGirolamo. I’m a certified financial planner and financial advisor here at Blue Chip Partners. This is the series where I sit down with advisors to talk about the technical and emotional sides of financial planning.

To help you make informed decisions about your future. If you like our content, please be sure to like and subscribe so you don’t miss the next episode. And thanks so much for watching! Let’s chat.

Today I’m here with Dan Seder. Dan is a Chartered Financial Analyst, a Chartered Market Technician, and a Certified Financial Planner. He’s also the managing partner here at Blue Chip.

So Dan, thank you for joining me.

Gina, thank you for having me. I am so excited.

Awesome. Well, we’re going to be talking about the mega backdoor Roth strategy. But before we get into that, can you start by explaining what a basic backdoor Roth is?

A basic backdoor Roth is ideal for high-income earners. The Roth IRA has an income limitation, so if you make too much money, you can’t contribute directly to a Roth IRA. If that high-income earner doesn’t have an existing IRA balance, they can convert all of their after-tax contributions over to Roth, tax-free.

So moving into the mega backdoor Roth strategy, how is that different? What’s the key difference between a basic backdoor Roth and the mega backdoor Roth?

They function the same, but the mega backdoor Roth is amplified. The numbers are just bigger—it’s a larger opportunity. The main difference is that it has to be executed on a 401(k) platform.

How does the mega backdoor Roth work?

Generally, there are three contribution types that go into a 401(k). There’s the employee contribution, the employer match, and then an after-tax contribution source. Most people who come to us say they max out their 401(k) employee contribution and receive some type of match, but they’re forgoing that third bucket.

A mega backdoor Roth is when someone makes after-tax contributions through payroll into that third bucket within the 401(k), and then converts those dollars over to Roth, tax-free.

Could you share an example and put some numbers around how this works?

Sure. Let’s say the employee is making the full employee contribution of $24,500, which is the max in 2026. For illustrative purposes, let’s assume the employer matches $10,500. The combination of those two is $35,000 in contributions.

The maximum using all three sources—including the after-tax bucket—is called the 415(c) limit, which is $72,000 in 2026. That means the employee can fill the gap of $37,000 with after-tax contributions. Those after-tax dollars can then be converted to Roth, tax-free.

There’s also something called the catch-up contribution for someone over age 50. Can you talk a little about that?

Sure. If you’re 50 or older, you can make an additional contribution into your retirement plan. This isn’t new, but the numbers have changed. In 2026, that amount is $8,000.

This generally goes in as a deferral, so it doesn’t change the after-tax opportunity with the mega backdoor Roth, but it does give people age 50 or older a chance to save an additional $8,000 for retirement.

And if you’re between ages 60 and 63, there’s now an additional super catch-up contribution that can be made. This can be a very impactful opportunity for high-income earners to save more into their retirement plan.

If you could give a few key takeaways to someone considering this strategy, what would they be?

First, it’s one of the most underutilized tools for high-income earners—very few people are actually executing on it. Second, it significantly increases the amount of Roth conversions you can do, which is a major benefit.

The dollars involved can be substantial. For example, if someone maxes out after-tax contributions for ten years and earns a reasonable return, they could potentially accumulate around $1 million in that after-tax bucket.

Roth accounts are very powerful. They don’t have required minimum distributions. The more you can fund into Roth accounts, the fewer RMDs you’ll face down the road, giving you more control over your taxable income later in life.

Finally, if wealth transfer is a concern, Roth accounts are among the most effective account types to pass on to the next generation.

Great explanation. Dan, thank you so much for joining me today.

Thank you. Absolutely.

Everyone’s situation is unique, so please reach out to your financial advisor or contact us at Blue Chip Partners, and we’d be happy to help review.

And thanks so much for joining. Can’t wait to chat again soon.