With Tens of Thousands in Savings, Is a Mega Backdoor Roth Conversion Your Best Move?

You’ve done everything well: you’re maxing out your 401(k) contributions and funding your IRA. But now you have a significant sum of money—say, tens of thousands of dollars—sitting in a taxable brokerage account. The money’s growing, but bleeding taxes on dividends and capital gains every year. Your income is too high for direct Roth IRA contributions, and the $7,500 annual Roth limit feels almost irrelevant at your savings rate.

A mega backdoor Roth can change that math. The strategy uses a quirk in 401(k) rules to funnel after-tax dollars into Roth IRAs, potentially $30,000 to $35,000 a year beyond what normal retirement accounts allow. Over a decade or two, that’s hundreds of thousands of dollars shifted from taxable to tax-free.

But the move demands the right plan features, a comfortable cash cushion, and a timeline long enough to justify locking the money away. Here’s how to know if it makes sense for your savings.

The 401(k) Quirk That Unlocks Bigger Roth Contributions

A mega backdoor Roth is an advanced 401(k) strategy that lets you convert large after-tax contributions into a Roth, far beyond what a normal Roth IRA would allow. Instead of capping out at $7,500 per year in a Roth IRA, qualifying high earners can shift tens of thousands of dollars annually into tax-free growth.

In 2026, the total 401(k) contribution limit, including employee deferrals, employer money, and after-tax contributions, tops out at $72,000.

A mega backdoor Roth works by filling that extra space with after-tax dollars, then quickly converting them to Roth through an in-plan rollover or a Roth IRA. If your plan doesn’t allow after-tax contributions or in-service conversion, this strategy is off the table, no matter how much you have in savings.

Where the Extra Room Comes From

Think of your 401(k) as having two ceilings. The first is the regular employee deferral cap: $24,500 in 2026. The second is the overall 401(k) limit of $72,000, which includes your employer’s matching contributions, profit-sharing, and after-tax contributions.

A mega backdoor Roth fills the gap between those two ceilings with after-tax dollars, then converts that money to Roth so future growth is tax-free. For example, if your deferrals plus employer contributions total $35,000, you may have about $37,000 of room left for after-tax contributions and conversion. Compound that over many years, and you could build several times your original amount in tax-free retirement savings.

High earners typically hit Roth IRA income limits when their joint income exceeds the $242,000 to $252,000 phaseout range for 2026, which blocks direct Roth contributions. A mega backdoor Roth sidesteps those limits entirely because it operates inside the 401(k) framework, which is why it’s often recommended for high-income W-2 workers and business owners with very high savings rates.

One wrinkle for 2026: if you earned more than $150,000 in FICA wages last year, the SECURE 2.0 Act requires any catch-up contributions to go in on a Roth basis. That doesn’t change how the mega backdoor itself works, but it could be an important consideration.

When a Mega Backdoor Roth Makes Sense

If you and your partner earn well into six figures, have already maxed out your 401(k) and IRA contributions, and still have tens of thousands or more left to invest, you’re squarely in mega backdoor territory. The strategy is especially compelling if you have six to 12 months of cash reserves, modest debt, and at least 15 years until retirement. In that case, steadily shifting part of your taxable savings into mega backdoor Roth contributions could make sense.

If your savings are not that strong, or if that sum of money is earmarked for other things—like a home down payment, tuition, or a business launch in the next few years—the trade‑off changes. You may need flexibility and simplicity more than squeezing out extra tax‑free growth, especially when a mistake could trigger unexpected tax bills. In those situations, keeping more of your money in a taxable brokerage or high‑yield savings account may be the more practical choice for now.