Disclaimer: I’m a Registered Investment Advisor, but not a tax professional. This is neither personalized investment advice nor tax advice: consult a tax pro or your own investment advisor for your particular situation.
Backdoor Roth IRA
The backdoor Roth IRA is just a strategy for people who cannot contribute to a Roth IRA otherwise because their income is too high (per the IRS’s Roth IRA contribution income limits.) If you can already contribute to a Roth IRA, then you’d just do that, and there would be no need for you to do the backdoor version. For those with high incomes who are already maxing out their 401ks & HSAs at work (because that’s probably the first place you should put your investment money), but want to save even more tax-advantaged dollars for retirement, the backdoor Roth IRA is the way to go.
Step #0 (if necessary) – Move any pre-tax IRA money into a 401k
You should first either rollover all existing pre-tax IRAs (SEP IRAs, SIMPLE IRAs, Traditional IRAs, pre-tax Rollover IRAs) to your 401k, if possible, to avoid having to convert pre-tax Traditional IRA money to Roth IRA and pay income taxes on it, OR just be willing to pay those taxes in order to get more into your Roth IRA (smart when that income would still put you in a lower-than-usual-or-in-retirement tax bracket.) The key is that you must have NO money in any traditional, rollover, SEP, and SIMPLE IRAs (401(k)s, 403(b)s, 457(b)s, Roth IRAs, or inherited IRAs are all ok) by the end of the tax year (Dec 31st) of the year you CONVERT (not contribute) the IRA money to Roth IRA.
Therefore, it is critical that you DO SOMETHING with any IRA balance you have PRIOR to December 31 of the year in which you do a Roth conversion of after-tax money. You should also do this before you make your non-deductible contribution to any Trad IRA, since (I believe, but am a little confused on this) that this alone with mean you can’t ONLY convert the non-deductible contribution later.
Later in this article, I’ll describe the exact options you have for what to do with this money.
(Be careful also if you make the backdoor Roth conversion early in the year, and then forget about it and create a Trad IRA balance by the end of the year (by, say, rolling an employer 401k to Trad IRA.))
If you DON’T have a 401k that you can push the Trad IRA funds into, BUT you happen to currently be in an HSA-eligible health insurance plan AND will keep it for at least the next 12 months, you can do a once-in-a-lifetime rollover from your IRA to your HSA up to the annual HSA limit ($4,150 for individuals / $8,300 for couples in 2024.) Whatever you rollover to your HSA will count against any other HSA contributions you made for that tax year, and unlike regular HSA contributions, it must be completed during the CALENDAR year for that tax year.
Then, NEVER rollover any old 401ks to Trad IRAs again! Roll them into your current employer plan, if has good investment choices, or a Solo 401k if you’re a sole employee in your own business, or just keep them where they are at your old employer.
Step #1 – Make your non-deductible Trad IRA contribution
Once you’ve confirmed that you have no pre-tax IRA money out there, make your (non-deductible) contribution for the year to a regular Traditional IRA.
Step #2 – Convert to Roth IRA
Wait about a week or so, then convert that Traditional IRA full account balance (should be little to no interest if you’ve kept it in cash) to a Roth IRA at the same firm.
Backdoor Roth IRA FAQ
Q: If I’m married, does it matter if my spouse has Traditional IRAs when I do my own backdoor Roth?
A: No, the IRS treats each spouse’s IRAs as separate, so you only have to worry about your own IRAs for the purposes of a backdoor Roth. Per Kitces,
[A] husband and wife’s IRA accounts are not aggregated together across the marital unit (although the husband still aggregates all the husband’s IRAs, and the wife aggregates all the wife’s IRAs). Nor are an individual’s own IRAs aggregated together with any inherited IRA accounts on his/her behalf. And any existing Roth IRAs – and the associated after-tax contributions that go into Roth accounts – are not aggregated either.
In addition, any employer retirement plans – e.g., from a 401(k), profit-sharing plan, etc. – are not including in the aggregation rule. However, a SIMPLE IRA or SEP IRA, both of which are still fundamentally just an “IRA”, are included.
Q: How much can I convert to Roth?
A: As of writing there is no limit on how much you can convert from tax-deferred savings to your Roth IRA in a single year.
Q: When can I access my non-deductible IRA conversions once they’re in the Roth IR?
A: You can withdraw those non-deductible aka after-tax contributions at any time for any reason with no taxes or penalties. Any earnings must generally stay in the Roth IRA until you’re 59.5 to avoid the 10% penalties & taxes (and also have had any Roth IRA open for at least 5 years.) If you convert any pre-tax IRA amounts, you must wait 5 years before withdrawing the converted amount.
Step #3 – At tax time, input your 1099-R data correctly
If you do your own taxes, make sure to tell the IRS exactly how much of your 1099-R distribution from your Traditional IRA was non-taxable when you converted it to your Roth IRA. If you had no pre-tax IRA money when you made your non-deductible contribution, then ALL of that contribution was non-taxable. If you had a little interest/investment gain on the money, that part will be taxable as regular income and the rest won’t be. Again, consult your tax pro or do your own tax homework to confirm for your situation.
Mega Backdoor Roth 401ks
What is the mega backdoor Roth?
The mega backdoor Roth is a 401k plan open that lets those who want to contribute more Roth dollars than the IRS max of $23,500 (2025) into their ‘regular’ 401k options (pre-tax or Roth) allows.
How much can you put into the mega backdoor Roth?
The IRS sets a maximum 401k contribution limit of $70,000 in 2025. That limit comprises three pieces: your employer contribution, your employer’s contribution, if any, and your after-tax (mega backdoor Roth) contributions. So, if you’re maxing our your pre-tax at $23,500 and make $150,000 and your employer matches a straight 5% of your salary ($7,500 = 0.05 * $150 K), then you can contribute $70,000 – $23,500 – $7,500 = $39,000 to your after-tax and then convert it to Roth.
Does your plan support mega backdoor Roth?
If your 401k plan allow ‘after-tax contributions’: check your ‘Contributions’ page. You should see both pre-tax or Roth options, then a 3rd option called something like ‘after-tax’. If you have this option AND the Roth option, it’s a good bet your employer’s 401k plan supports megabackdoor Roth conversions.
If you can’t contribute either after-tax OR to a Roth, then you probably can’t do this, but either call your plan provider (e.g.: Fidelity) or dig through the Summary Plan Description to be sure. Calling is best.
Convert your after-tax 401k contributions to Roth
Call your plan provider or check the contributions page on their website to see if you can set up automatic Roth conversions of any future after-tax contributions. If you already have after-tax contributions, ask your 401k provider to convert the after-tax portion to Roth, and sweep any accumulated (pre-tax) earnings on that after-tax portion into your pre-tax 401k, if possible (or, convert it also to Roth, taking the income tax hit on the amount of earnings.)
What to do with old after-tax contributions from prior 401k
If you have after-tax contributions from an old employer 401k that you either never got around to converting to Roth, or just couldn’t, you should be able to move the after-tax part to a Roth IRA, the pre-tax part and any earnings on that after-tax part to your new employer’s 401k (or a Traditional IRA, but that’s less optimal if you want to make backdoor Roth IRA contributions as described above.)
It’s VERY IMPORTANT to handle both the pre- and after-tax portions in your 401k at the same time by calling your provider. If you screw this up, you could have created negative tax implications for yourself.
Usually your after-tax contributions will be converted to the Roth 401k, but sometimes your 401k will actually kick them out to your own Roth IRA. This is fine too, but may not be something you have to periodically call the 401k provider to do, which is annoying.
Mega backdoor Roth 401k FAQ
Q: When can I withdraw my converted after-tax Roth principal?
A: I think at the very least (check this! I’m not sure yet!), if you leave your employer/retire, you should be able to withdraw the converted principal at any time with no penalties or taxes, so long so you were converting after-tax amounts, once you roll it over to a Roth IRA first. (I believe you can NOT do this while it’s in the Roth 401k because the IRA doesn’t let you withdraw just the after-tax basis, but rather would deem any withdraw from the Roth 401k to have a pro rata mix of earnings and contributions, but check this yourself!)
For moving money into either a Roth 401 or Roth IRA from your 401k after-tax portions, the amount(s) you might have in Trad IRAs aren’t relevant (i.e.: the ‘cream in the coffee’ rule doesn’t apply since it’s a 401k and not an IRA conversion.)
To read more: https://www.nerdwallet.com/article/investing/mega-backdoor-roths-work
