Maximizing Your Retirement Savings with the Mega Backdoor Roth 401(k)
If you’re a high-income earner already maxing out your 401(k), you might assume you’ve hit the ceiling on tax-advantaged retirement contributions. But there’s a lesser-known strategy that could let you contribute well beyond the standard limits: the Mega Backdoor Roth 401(k).
When available, this strategy can allow you to contribute up to $70,000 total into your 401(k) in 2025—and potentially convert a big portion of that to Roth.
Let’s walk through how it works, who it’s for, and why it’s so powerful.
The 2025 401(k) Contribution Limits (Quick Recap)
Before we get to the “mega,” here’s the base framework for 2025:
$23,500 employee deferral limit (under age 50)
$7,500 catch-up if age 50+
$70,000 total contribution limit (includes employee + employer + after-tax contributions, excludes catch-up)
If your employer offers a match or profit-sharing, that counts toward the $70K. But here’s the kicker: any unused room can potentially be filled with after-tax contributions.
How the Mega Backdoor Roth 401(k) Works
Here’s the high-level process:
Contribute after-tax dollars to your 401(k), beyond the $23.5K employee deferral limit
Convert those after-tax contributions to Roth—either in-plan (Roth 401(k)) or via an in-service rollover to a Roth IRA
Those Roth dollars grow tax-free and are no longer subject to required minimum distributions
This allows you to build a larger Roth bucket, which gives you more long-term flexibility and fewer tax surprises later in retirement.
Who This Strategy Works Best For
The Mega Backdoor Roth 401(k) is ideal if you:
Max out your employee 401(k) deferrals each year
Have additional cash flow available to save
Work for an employer that allows after-tax contributions and in-service Roth conversions or rollovers
Want to grow your Roth assets without income limitations
Not all plans allow for this—plan design is everything. But if it’s available, it can be one of the most powerful tax planning tools available to high-income earners.
Real-Life Planning Opportunities
At Memento Financial Planning, we help clients:
Review their plan documents to confirm if after-tax and Roth conversions are allowed
Calculate available space within the $70,000 limit (accounting for employer contributions)
Evaluate whether in-plan conversion or Roth IRA rollover is better
Coordinate this strategy with RSU vesting, taxable account funding, and overall cash flow
Why It Matters for Lifetime Tax Planning
Roth strategies aren’t just about avoiding taxes today—they’re about creating lifetime tax flexibility. With rising federal debt and growing fiscal pressures, many high earners are rightly concerned that tax rates could be higher in the future.
By shifting more dollars into Roth accounts now—while tax rates are relatively low—you reduce your exposure to future rate hikes and gain more control over your taxable income later in life.
This is especially powerful when paired with assets that have long-term growth potential. For clients with the appropriate risk tolerance and capacity, that might include allocating a portion of Roth accounts to assets like Bitcoin, which could benefit from tax-free growth inside a Roth IRA or Roth 401(k).
Why It’s Worth Exploring
Most high earners will retire with a large pre-tax 401(k) balance. That means required minimum distributions and limited flexibility later in life.
The Mega Backdoor Roth is one of the few ways to proactively shift more assets into tax-free territory—now, while you’re in peak earning years and before potential tax policy changes.
👉🏼 Interested in whether this strategy fits your situation? Book a Memento Snapshot meeting.
