Mega Backdoor Roth
Routing large after-tax 401(k) contributions into a Roth — far beyond the normal IRA limit — where the plan allows conversions or in-service rollovers.
If your 401(k) plan allows after-tax contributions and in-plan Roth conversions (or in-service rollouts), you can move tens of thousands of additional dollars into Roth each year — well above the standard contribution caps. It's one of the most powerful tax-free-growth levers available to high earners, but it depends entirely on your specific plan's features. Worth checking before year-end.
The bigger version, inside your 401(k)
The mega backdoor moves far more than the IRA backdoor — potentially tens of thousands a year — into Roth via your workplace plan. You make after-tax (not Roth, not pre-tax) 401(k) contributions up to the overall plan limit, then move them to Roth through an in-plan conversion or a rollout to a Roth IRA. It only works if your specific plan allows both pieces.
Two plan features make or break it
Your 401(k) must permit after-tax contributions beyond the normal employee deferral, and it must allow either in-plan Roth conversions or in-service distributions of those after-tax dollars. Many plans offer one and not the other. Converting promptly also matters: any earnings on the after-tax money before conversion are taxable when moved.
How Formation handles it
Formation surfaces the headroom between what you've contributed and the overall plan limit, so the mega-backdoor opportunity is visible rather than left on the table — then you confirm your plan's features and execute with your advisor.
A worked example
Your employee deferral and the employer match together use part of the overall plan limit, leaving room before the total cap. If your plan allows after-tax contributions, you fill that remaining room with after-tax dollars and convert them to Roth — moving money to tax-free growth that the IRA backdoor alone could never reach.
How is the mega backdoor different from the regular backdoor Roth?
The regular backdoor moves a small IRA contribution; the mega backdoor uses after-tax 401(k) contributions to move far more — but only if your employer's plan supports after-tax contributions plus in-plan conversion or in-service distributions.
Does my 401(k) support it?
Not all do. You need two features — after-tax contributions above the normal deferral, and a way to convert them to Roth. Your plan's summary description or administrator will say.
In Formation
Roth headroom tracker