Mega Backdoor Roth Calculator

How the Mega Backdoor Roth Works

The mega backdoor Roth is an advanced retirement savings technique that allows high earners to move large sums of money into Roth accounts by first contributing to a 401(k) on an after‑tax basis and then promptly converting those funds. Traditional 401(k) plans permit pre‑tax or Roth elective deferrals up to an annual cap, but employer plans that also accept after‑tax contributions open the door to far larger deposits. Once made, those after‑tax dollars can be rolled over to a Roth IRA or converted in‑plan, where future growth is shielded from taxation. This calculator evaluates how much after‑tax room remains under the Internal Revenue Code’s Section 415(c) overall limit after accounting for your existing employee and employer contributions.

To use the tool, begin by entering the amount you have already deferred as an employee through either pre‑tax or Roth 401(k) contributions. In 2024, the elective deferral limit under Section 402(g) is $23,000, though workers age fifty or older may contribute an additional $7,500 as a catch‑up. Next, supply any employer contributions you expect, including matching and profit‑sharing amounts. Because the IRS caps total annual additions to a 401(k) at the Section 415(c) limit—$69,000 for 2024, or $76,500 when including catch‑up for older savers—the calculator subtracts your existing amounts from this ceiling to reveal the maximum after‑tax dollars you can still contribute.

The underlying formula for available after‑tax space can be expressed in MathML as:

In this equation, \(A\) represents the remaining after‑tax contribution space, \(L\) is the overall Section 415(c) limit, \(E\) is the employee elective deferral, \(M\) denotes employer contributions, and \(C\) is any catch‑up amount you plan to contribute. Catch‑ups do not count toward the 415(c) limit but they do require cash, so the calculator subtracts them to show the net amount of additional money you could deposit before hitting either ceiling. If the result is negative, you have already maximized the plan and no further after‑tax contributions are allowed under current rules.

Once the after‑tax funds are inside the plan, the mega backdoor strategy involves swiftly converting them to avoid taxation on any investment gains that might accrue while the money remains in the 401(k). Some plans allow in‑plan Roth conversions, meaning the after‑tax subaccount can be flipped to Roth status without leaving the employer’s plan. Others permit in‑service withdrawals, letting you roll the after‑tax portion to a Roth IRA while still employed. Either route culminates in Roth dollars that can grow tax‑free and be withdrawn tax‑free in retirement, provided statutory conditions are met. The true power of the strategy lies in using the high 415(c) limit to funnel tens of thousands beyond the standard elective deferral cap each year.

Consider the following table illustrating how contributions stack up for a saver under age fifty. Assume the individual contributes the maximum $23,000 in elective deferrals and receives a $10,000 employer match. With a $69,000 overall limit, the calculator reveals substantial room for after‑tax contributions:

In this scenario, the participant could contribute an additional $36,000 after tax, convert it to Roth, and effectively stash $59,000 into Roth accounts in a single year. For those age fifty or older, the logic is similar but includes the catch‑up provision. Enter the $7,500 catch‑up amount in the form, and the table would show how the total rises to $66,500 when the extra room is filled.

Not every employer plan supports this maneuver. The plan must allow after‑tax contributions beyond Roth or pre‑tax deferrals, and it must permit either in‑service withdrawals or in‑plan conversions. Without these features, the mega backdoor Roth cannot be executed. Moreover, highly compensated employees may run into discrimination testing limits that force refunds of after‑tax contributions. The calculator does not account for such plan‑level restrictions; it merely performs arithmetic based on statutory maxima. Savers should consult their plan documents or administrators to confirm eligibility before acting.

Tax considerations also warrant discussion. While the converted after‑tax principal itself is not taxed again, any earnings accrued before conversion will be included in taxable income if rolled directly to a Roth IRA. Executing conversions promptly minimizes this issue. Furthermore, because after‑tax contributions are made with dollars that have already been taxed, they do not reduce current taxable income like traditional deferrals do. Users should weigh whether allocating cash to this strategy is preferable to other options such as paying down debt or investing in taxable brokerage accounts.

The mega backdoor Roth is often compared with the more common backdoor Roth IRA, which involves making nondeductible contributions to a traditional IRA and then converting. The mega variant operates on a much grander scale thanks to the 401(k) limits, but it also requires a cooperative employer plan and careful execution to avoid missteps. The calculator’s long explanation explores the historical context of these rules, the IRS guidance permitting in‑plan conversions, and best practices like keeping meticulous records of after‑tax basis. By understanding both the mechanics and potential pitfalls, investors can decide whether the strategy aligns with their retirement goals.

Beyond the mechanics, the explanation delves into strategic considerations. For example, savers planning early retirement may value the tax‑free growth of Roth accounts more than immediate tax deductions, making the mega backdoor attractive even if it requires sacrificing current cash flow. Others may prioritize liquidity or anticipate lower income in future years, opting to delay conversions until a lower tax bracket. We examine these trade‑offs in depth, providing scenarios that highlight how different financial profiles influence the benefit of pursuing the mega backdoor Roth.

Ultimately, this calculator is a starting point for conversation with financial and tax professionals. It quantifies the maximum after‑tax contribution space but does not capture nuances like state tax treatment, the pro‑rata rule when pre‑tax funds exist, or the impact on employer matching formulas. By experimenting with different inputs, you can gauge how close you are to the statutory limits and plan your contributions accordingly. When used alongside professional advice, the tool empowers savers to take fuller advantage of retirement account opportunities.