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Mega backdoor Roth limit for 2023 + How it works

A mega backdoor Roth is a way to save up to $43,500 annually in tax-advantaged Roth accounts. Watch for the contribution limits we’ll explore in this guide.



November 2, 2023

9 min read

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Key takeaways
  • A mega backdoor Roth allows you to stash extra money in your retirement account.
  • You contribute extra to your employer-sponsored 401(k) and rollover the funds into a tax-advantaged Roth account for safekeeping.
  • The mega backdoor Roth limit changes annually, and it can boost your nest egg with tax-free growth.
  • You’ll pay taxes on a portion of your rollover, and the process can lead to penalties if mishandled.
  • The mega backdoor Roth might not always be an option, so taking advantage while you can is key.

In this article

      We’ll explore the basics behind a mega backdoor Roth, touch on contribution limits, note steps to set one up, and lay out the pros and cons. Then, you can figure out whether you want to start saving for retirement with a mega backdoor Roth or if another strategy would be best for you.

      What is a mega backdoor Roth?

      A mega backdoor Roth allows you to contribute more than the typical limit to a Roth 401(k) or IRA. The mega backdoor Roth limit for 2023 is $43,500.

      If your employer matched any of your yearly contributions, your mega backdoor Roth amount will be that much less than $43,500.

      How to calculate mega backdoor Roth IRA limit

      It involves moving 401(k) contributions into a Roth IRA or Roth 401(k): In any given year, you’re allowed to contribute a certain amount to your 401(k) from pretax dollars. To utilize a mega backdoor Roth, you subtract that amount from the total IRS retirement contribution limit, giving you your mega backdoor amount.

      That mega backdoor amount is the post-tax dollar amount you can contribute to your 401(k) before moving it into a Roth 401(k) or Roth IRA. Doing so helps you avoid taxes on future gains so that your retirement account can grow without the impediment of future taxes.

      Mega backdoor Roth limit (2023)

      The mega backdoor Roth limit for 2023 is $43,500, regardless of your age. This is the total IRS limit minus the 401(k) contribution limit.

      For 2023, the traditional 401(k) limits are:

      Below age 50 Age 50 or older
      Traditional 401(k) limit $22,500 $30,000

      To get your mega backdoor Roth amount, subtract your 401(k) contributions and any employer-matched additions from the IRS contribution limit.

      For 2023, the total IRS contribution limits are:

      Below age 50 Age 50 or older
      Total contribution limit $66,000 $73,500

      This is the IRS contribution limit to all of your retirement accounts from any sources, including any employer contributions. Remember, these contribution limits change annually, so make sure you have the most current numbers from the IRS.

      When to use a mega backdoor Roth strategy

      The mega backdoor Roth strategy isn’t for everyone looking to contribute to a Roth retirement account.

      Mega backdoor Roth requirements

      There are a few pre-qualifications you should meet to take advantage of this tactic:

      • Eligible employer plan: You must have an employer-sponsored retirement plan that permits after-tax contributions and in-service withdrawals. Not all plans offer these features, so check with your employer to confirm eligibility.
      • Financial fortitude: You’ll need the financial power to make substantial after-tax contributions. The mega backdoor Roth isn’t for the financial faint of heart, as it involves stashing away significant chunks of your income.

      In-service withdrawals are distributions from your 401(k) while you’re still employed. This allows you to move money from the 401(k) into a Roth account. And you should still have money to move around if you want to use a mega backdoor Roth: This locks up your savings until retirement (unless you pay steep penalties).

      6 steps to set up a mega backdoor Roth

      Finding yourself with extra income after maxing out your retirement contributions means you can save extra money for retirement.

      A mega backdoor Roth strategy lets you add tens of thousands more to your 401(k) and transfer that to a tax-advantaged Roth account so you can watch those funds grow tax-free. These are the steps to take advantage of this retirement hack:

      1. Max out your 401(k).

      First, you need to contribute the maximum amount to your 401(k). For 2023, that’s a hefty $22,500 if you’re under 50 and $30,000 if you’re 50 or over. This sets the stage for the mega backdoor Roth.

      2. Check your plan eligibility.

      Not all employer plans allow for the mega backdoor Roth. You’ll need to check if your plan permits after-tax contributions and in-service withdrawals, which are crucial for this strategy.

      More than one-fifth (22%) of Vanguard plans offered after-tax employee-elective deferrals to participants in 2022. Large plans were even more likely to offer this after-tax feature, accessible to 36% of participants.

      To check if your plan is eligible, use the following template to reach out to your HR representative:

      Hello [HR Team/HR Representative's Name],

      I've been researching retirement contribution strategies and came across the mega backdoor Roth IRA contribution. I'm interested in understanding if this is something we can pursue through our company's 401(k) plan.


      Does our 401(k) allow for after-tax contributions beyond the standard limits?

      If so, is there an option to roll these contributions into a Roth IRA while still employed here? Are there any company-specific guidelines or procedures I should be aware of?

      I'm in discussions with my financial advisor about this, but wanted to get clarity on our company's stance first. Thank you for your time and assistance.

      Best regards,

      [Your Name]

      3. Make after-tax 401(k) contributions.

      Once you’ve confirmed your plan allows it, start making after-tax contributions. These differ from the pretax contributions you’d normally make to your 401(k). Between your pretax contributions, after-tax contributions, and any additions your employer makes, your 401(k) can accept up to $60,000 in 2023 if you’re under age 50, and $73,500 if you’re  50 or older.

      4. Convert to a Roth account.

      Now, the magic happens. You convert your after-tax contributions to a Roth IRA or Roth 401(k) – similar to an IRA rollover or transfer. You’ll need to pay income taxes on any earnings when you convert, but then you can enjoy tax-free growth on your investments and tax-free withdrawals in retirement. 

      5. Keep an eye on the pro rata rule.

      Watch out for the pro rata rule when converting. If you have other traditional IRAs, the IRS may consider them when calculating the tax owed on your Roth conversion.

      The pro-rata rule on baackdoor roth conversions

      The pro rata rule determines the ratio you should use when calculating how much of your conversion is pre-tax dollars and how much is after-tax – you can’t choose to only convert your after-tax dollars.

      For example, you contribute $40,000 in after-tax dollars to your 401(k), and you have a total 401(k) balance of $200,000. Dividing your after-tax contribution by your total balance ($40,000/$200,000) tells you that 20% of any Roth rollover amount will be taxable.

      6. Enjoy your tax-free gains.

      Once your after-tax contributions are safely in your Roth account, they grow tax-free. That means you won’t owe a dime in taxes when you start withdrawing your savings in retirement. It’s a legal way to have your cake and eat it, too.

      Mega backdoor Roth pros & cons

      If you can take advantage of a mega backdoor Roth, doing so can provide some excellent benefits for your retirement fund. However, the strategy can be too complex for those looking for a simple, straightforward retirement plan.

      Take a look at these pros and cons to help you decide.


      Check out these mega backdoor Roth benefits:

      • Supercharged savings: Mega backdoor Roths allow you to contribute more money to your Roth IRA than traditional contribution limits; in 2023, that could be up to a staggering $66,000 if you’re under age 50 or $73,500 if you’re 50 or older.
      • Tax-free growth: Once your after-tax contributions are safely inside your Roth account, they grow tax-free. No capital gains taxes, no dividend taxes – it’s a haven for your investments.
      • Tax-free withdrawals: In retirement, you can tap into your mega backdoor Roth account without owing a single penny in taxes as long as you’re at least age 59½. It’s a nice little parachute to cushion your golden years. If you retire early, it’s best to have other income to fall back on before withdrawing from your retirement accounts.
      • No minimums: Converting into a Roth means there are no required minimum distributions once you reach retirement age. This means your money can continue to grow with greater compounding force as opposed to you taking out contributions.

      Roth accounts are tax-free investments as long as you adhere to contribution and withdrawal guidelines, so they’re a great way to reduce your tax liability later in life when you want to enjoy your retirement free from Uncle Sam’s prying eyes.


      As with any financial strategy, there are potential pitfalls to keep in mind with a mega backdoor Roth:

      • Complexity: Managing the mega backdoor Roth strategy can be intricate. You’ll need to navigate contribution limits, tax implications, and the pro-rata rule. It’s not for those seeking a simple retirement savings plan.
      • Employer plan limitations: Your ability to use the mega backdoor Roth depends on your employer’s plan. As we mentioned earlier, you’re out of luck if the plan doesn’t support after-tax contributions or in-service withdrawals.

      Backdoor Roth vs. mega backdoor Roth: What are the differences?

      Ah, the plot thickens! With all these retirement options, knowing which is which can give you a leg up in the long run.

      The mega backdoor Roth and a regular backdoor Roth may sound similar, but they have distinct differences when it comes to contribution limits and tax treatment.

      Backdoor Roth Mega backdoor Roth
      Contribution limits Under 50: $6,500*
      50 or over: $7,500*
      Under 50: $66,000*
      50 or over: $73,500*
      Tax treatment Taxes aren't owed unless the investment generates earnings before the conversion is complete. Convert after-tax contributions to Roth, and avoid taxes on future gains.

      The chart uses numbers from the IRS’s 2023 contribution limits.

      Is the mega backdoor Roth going away?

      Right now, the mega backdoor Roth is not going away as long as your employer plan allows it. That’s good news! But it’s not permanent news – there could be legislation on the way that eliminates the option to make after-tax contributions.

      Make the smartest choice for your retirement fund.

      A mega backdoor Roth is a retirement option that allows you to invest significantly more tax-advantaged money into a Roth IRA or 401(k) than you’d otherwise have the ability to. But it doesn’t come without the risk of significant tax penalties.

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      About the author

      Phil Wettersten, Series 7 & 66

      Head of Product Success

      Phil holds both Series 66 and Series 7 credentials and previously served as an Investment Consultant at TD Ameritrade. At Playbook, he's the authoritative voice representing our customers, spearheading product enhancements and strategic planning. Phil's unwavering dedication keeps us ahead in delivering top-notch user experiences.

      Tanza Loudenback, CFP®


      Tanza is a CFP® certificant, writer, and editor. From 2015 to 2021, she was a top-read author and editor at Insider. Her work focuses on helping people make smart decisions with their money and is published by a variety of online publications.

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