The Mega Backdoor Roth
How to move $72,000 into Roth accounts this year
"Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it"
— Albert Einstein
What Is the MEGA Backdoor Roth?
As we kick off the new year and folks are already thinking about their 2026 strategy for their retirement contribution plans, I want to highlight a strategy that higher-income individuals can use to max out their Roth accounts.
Historically, you’ve probably been told:
You make too much money to contribute to a Roth IRA, or
The most you can put in your 401(k) is $24,500 (2026 limit)
—> Both of those statements are technically true, but kinda false in practice.
By utilizing a specific maneuver within your workplace retirement plan, you can ignore the income phase-outs and ~triple your Roth contributions.
Here is your guide to the Mega Backdoor Roth:
—
The MEGA backdoor Roth is a legal strategy that allows you to contribute up to an additional $47,500 in 2026 to a tax-free Roth account, even if your income exceeds Roth IRA limits.
It's simply a secret for maxing out retirement savings…
A strategy for people who have already maxed out their standard 401(k) contributions.
The IRS allows up to $72,000 total into your 401(k) each year (this limit includes employer matches). For the people that max out their 401(k)s with $24,500 annually, there's still a massive gap remaining, and the MEGA strategy lets you fill it with after-tax money that converts to Roth.
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Step 1: The Three Buckets
To understand the strategy, you have to look at the three ways you can put money into a 401(k):
Pre-tax: You get a tax break now, pay taxes later (Limit: $24,500 in 2026)
Roth 401(k): You pay taxes now, it’s tax-free later (Limit: $24,500 in 2026)
After-Tax (The Secret Bucket): This is different from a Roth 401(k). You pay taxes now, but the earnings are usually taxable later also... UNLESS you use the Mega Backdoor Roth conversion strategy
Step 2: How the Strategy Works
Contribute “After-Tax” money: Once you hit your $24,500 limit for the year, some 401(k) plans allow you to keep contributing into the “After-Tax” bucket until you hit the total plan limit (which is $72,000 for 2026)
The Conversion: Immediately move (convert) that After-Tax money into a Roth IRA or a Roth 401(k)
By moving this capital into a Roth account, future growth and interest becomes tax-free forever. If you leave it in the “After-Tax” bucket though, you’d eventually have to pay taxes on those gains in the account.
These contribution limits change each year for 401(k)s and IRA’s, so I’ve outlined below how things changed YoY:
2025 IRA/Roth IRA: $7,000
2026 IRA/Roth IRA: $7,500
2025 Total Plan Limit (401k+After Tax Account): $23,500
2026 Total Plan Limit (401k+After Tax Account): $24,500
Note: If you are age 50–59, your total 2026 max limit is $80,000. If you are 60–63, it's max $83,250 due to the new SECURE 2.0 "super catch-up" rules.
—> Example
Let’s say you are under 50 and want to save as much as possible:
Your Contribution: You max out your 401(k) at $24,500
Employer Match: Your company puts in $10,000 as part of their matching program
The Gap: The IRS allows a total of $72,000 in your 401(k) — you’ve only used $34,500
The “Mega” Contribution: You can contribute an additional $37,500 as After-Tax funds and then convert them to Roth
Can you can do this?
You can only do this if your employer’s specific 401(k) plan allows two specific things:
After-tax contributions: Not all plans offer this
In-service distributions or conversions: Your plan must allow you to move that after-tax money into a Roth IRA or Roth 401(k) while you are still working there
Just ask your compliance or HR department if you can do this. If they don’t know, tell them to find out… lol!
Why do it?
High Income: You can do this even if you earn $1M+ and are technically disqualified from a regular Roth IRA (although you can always do a backdoor conversion)
Higher Limits: You can put away nearly triple the normal Roth limit.
Tax-Free Growth: All the money you move into the Roth account side grows and is withdrawn totally tax-free in retirement.
Usually high-earners who care substantially about retirement and financial comfortability down the road are the individuals who pursue this strategy.
—> I personally don’t do this and would rather just contribute the max $24,500 401(k) amount to my Roth.
This is just my personal opinion though, as I think there’s a life balance between being conscious of your monetary goals at retirement, but also realizing the utility of money is greater at a young age… unless you make a WHOLE lot of dough!
Step-by-Step: How to Execute at Schwab
I personally use Charles Schwab as my brokerage, so below is step-by-step instructions on how to execute on this through the desktop app.
Note: Always do this type of stuff on your desktop, as mobile doesn’t always have the same capabilities.
Making After-Tax Contributions:
Go to workplace.schwab.com and log in with your credentials
Click “Manage Account” from the main menu
Select “Change Contribution”
Look for an option labeled “Employee After-Tax Def” or similar
Enter the dollar amount you want to contribute after-tax each pay period
Click “Save Changes”
Setting Up Automatic Conversion (Recommended):
To avoid leaving after-tax contributions unconverted (which would accumulate taxable earnings), set up automatic conversion:
Log into workplace.schwab.com
Go to “Manage Account” > “In-Plan Roth Rollover”
Confirm you’re a U.S. citizen or resident
Select “Automatic In-Plan Roth Rollover Only” and click “Get Started”
Click the toggle to turn “On”
Check the box: “I understand and agree to the information provided”
Click “Submit” to finalize
This automation ensures your after-tax contributions convert to Roth immediately with each payroll, minimizing taxable earnings.
Manual Conversion (If No Automatic Option):
Log into workplace.schwab.com
Select “Move Money” or “Online Transfer”
Choose “From: After-Tax 401(k)” and “To: Roth 401(k)” (or Roth IRA if rolling out)
Enter the amount
Click “Submit”
If you don’t have the capital to do this or don’t have interest in putting this much money aside into retirement, again, that’s totally understandable. In the game of life, I don’t think it’s worth it unless you make a YACHT LOAD of money.
The Critical Timing Factor
Every day your after-tax contributions sit unconverted, they earn interest or investment gains.
Those earnings become taxable when you convert.
So don’t wait too long to convert — this is why I think automating the conversion is the best idea — then you don’t have to think about it as well.
Conclusion on the MEGA Backdoor Roth
The MEGA backdoor Roth is a powerful tool for high-income earners looking to maximize tax-free retirement savings.
By understanding the three contribution buckets and executing the conversion strategy, you can leverage the $72,000 annual limit to your advantage.
For someone earning $500,000 annually, contributing an extra $47,500 to the Roth compounds meaningfully over time. At an 8% annual return over 30 years, that single year's contribution (the $47,500) alone grows to ~$480,000, entirely tax-free.
Multiply that across three decades of contributions, and the compounding advantage becomes substantial. Whether through Schwab, Fidelity or another platform, find out if your employer offers this — the mechanics are straightforward once you know if your plan supports it.
Disclaimer: The information provided in this publication is for informational and educational purposes only and does not constitute investment, financial, or other professional advice. ThePrivatePublicInvestor and its authors are not registered investment advisors or broker-dealers. All opinions expressed reflect personal views as of the date published and are subject to change without notice. While efforts are made to ensure accuracy, no guarantee of completeness or reliability is given. Past performance is not indicative of future results. The author may hold positions in securities discussed. Use of this content is at your own risk.
Thanks for sharing. Important point on automation - the timing risk on unconverted after-tax contributions is often overlooked, especially in volatile markets.
This is really great, thank you!!