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Key takeaways
- Backdoor Roths and mega backdoor Roths are strategies used by high earners who aren’t eligible to contribute to Roth IRAs due to the income limits.
- The backdoor Roth and mega backdoor Roth strategies allow high earners to save more for retirement via a tax-advantaged account than they may otherwise be able to.
- Both backdoor Roths and mega backdoor Roths come with advantages and disadvantages, which are important for investors to consider.
A Roth IRA is a great way for savers and investors to grow wealth. The advantages include tax-free growth on money withdrawn after age 59 ½, assuming the account has been open for at least five years.
But high earners often can’t contribute to a Roth IRA. If your modified adjusted gross income (MAGI) is more than $165,000 in tax year 2025 ($246,000 if married, filing jointly), you can’t contribute to a Roth IRA at all.
This situation gave rise to the backdoor Roth and the mega backdoor Roth. They sound similar, but there are many differences between the two strategies. If you’re a high earner, one of them might be worth pursuing.
What is a backdoor Roth IRA?
A backdoor Roth IRA is fairly straightforward. If you make too much to contribute directly to a Roth IRA, you contribute to a traditional IRA instead and then convert it to a Roth. While you can only contribute up to $7,000 to an IRA in 2025 ($8,000 for those 50 and over), there is no specific conversion limit.
To contribute to a backdoor IRA, you could:
- Contribute to a traditional IRA and then convert it to a Roth
- Convert several years of contribution at once, moving them from traditional to Roth
However, if you have pre-tax money in your traditional IRA, you may not be able to move it into a Roth account. This is due to the IRS’s pro-rata rule. And even if this doesn’t apply, the conversion could be taxable.
There are no eligibility requirements related to income or age to make a conversion, and you can contribute to a traditional IRA at any age as long as your compensation is taxable.
What is a mega backdoor Roth?
The backdoor Roth is a good way to grow wealth without paying taxes on earnings, but the pro-rata rule makes it infeasible for some. In that case, the mega backdoor Roth might be a viable alternative.
The mega backdoor Roth works a little differently. With this strategy, you usually:
- Contribute the maximum amount to a 401(k), which is $23,500 in 2025 ($31,000 for those 50 and over, and $34,750 for those age 60 to 63).
- Contribute an additional $46,500 in after-tax dollars to your 401(k), assuming no employer match.
- Convert the money to a mega backdoor Roth, which can be either a Roth IRA or Roth 401(k), if your plan allows.
The reason for the $46,500 limit is this plus $23,500 (or $31,000 or $34,750) puts you at the maximum total contribution for the year. You must deduct that from the $46,500 if your employer offers matching contributions.
To pursue this strategy:
- Your employer’s plan must allow after-tax contributions to their 401(k).
- The plan must also allow either in-service distributions or let you move money from an after-tax part of your plan to the Roth 401(k) part of your plan.
While this strategy is more complex than the backdoor Roth, it can be worth it for those who earn a lot — and whose employers’ plans have the characteristics necessary to enable the mega backdoor Roth.
Mega backdoor Roth versus backdoor Roth IRA
Both strategies can give your savings a boost, but each has pros and cons.
| Backdoor Roth | Mega backdoor Roth | |
|---|---|---|
|
Pros |
Get around income limits: A backdoor Roth allows you to contribute to a Roth IRA, even if your income would normally preclude you from doing so.
Tax benefits: Money in a Roth IRA can be withdrawn tax-free in retirement, assuming the account has been open for five years. No required minimum distributions (RMDs): There are no RMDs for Roth IRAs, so you can withdraw the money whenever you want. |
Larger contributions: This strategy lets you contribute much more than normal into a Roth IRA.
Tax-free growth and withdrawals: Once the money is in the Roth account, it can be withdrawn tax-free in retirement. Minimizes taxes: If you roll funds into a Roth plan soon after the contribution, you can minimize the taxes you would otherwise pay on gains. |
|
Cons |
Tax consequences: There could be state, local or federal taxes that apply to backdoor Roth conversions.
Higher income brackets: Because backdoor Roth conversions mean moving money from a pre-tax bucket to an after-tax bucket, it could move you into a higher income tax bracket. |
Limited availability: To access this strategy, your employer’s plan must allow after-tax contributions to a 401(k), plus either in-service distributions or conversions.
Tax implications: You may still owe taxes on the money you convert from a traditional 401(k) to a Roth account. |
FAQs
Bottom line
The backdoor Roth and the mega backdoor Roth are both viable strategies for getting around the typical income limits of a Roth IRA. The backdoor Roth IRA is best for converting money from a traditional account to a Roth. Meanwhile, the mega backdoor Roth is most suitable for high earners who want to contribute more than the typical contribution limit. Consider working with a financial advisor before committing to one or the other.
— Bankrate contributor Mallika Mitra contributed to an update of this article.
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