Using a Backdoor Roth IRA or a Mega Backdoor Roth IRA if your plan allows lets you contribute after tax dollars and convert them into a Roth account, growing tax free. This strategy is especially useful for high income earners who are otherwise ineligible for direct Roth IRA contributions. Follow these steps to ensure proper execution and avoid triggering unexpected taxes.

Disclaimer: Educational account opening steps only not personalized financial or legal advice and not a complete description of Backdoor Roth IRA and Mega Backdoor ROTH IRA rules. Consult your own brokerage adviser before acting.

Backdoor Roth IRA (for individuals)

Step 1: Confirm Roth IRA Income Limits

  • For 2026: Direct Roth contributions phase out at:
    • $153,000–$168,000 (single)
    • $242,000–$252,000 (married filing jointly)

If you're above these limits → you must use the Backdoor method.

Step 2: Open a Traditional IRA (if you don’t have one)

  • Open at a brokerage like Fidelity, Schwab, Vanguard, etc.

Make sure it’s empty or has no pre-tax money if possible (see Pro Rata Rule below).

Step 3: Contribute After Tax Money

  • Contribute up to $7,500 (or $8,600 if 50+) in 2026.
  • This is a non deductible contribution (i.e., you’ve already paid taxes on this money).

Step 4: Timing

  • Convert soon after the contribution settles, ideally within a few days. Any earnings that build up before the conversion are taxable when converted, so a quick conversion keeps the tax at or near zero.

Step 5: Convert to Roth IRA

  • Move the money from your Traditional IRA to a Roth IRA (at the same brokerage is easiest).
  • There should be little or no tax due if:
    • You contributed post tax dollars

You had no other Traditional IRA funds (see below)

If you have any other Traditional, SEP, or SIMPLE IRA balances, the IRS considers all accounts combined when calculating tax owed on the conversion.

Example:

If you have $93,000 of pre tax IRA money and contribute $7,500 after tax, then convert $7,500 → 93% of it is taxed.

To avoid this: Roll your pre tax IRA into a 401(k) at work (if allowed), which doesn’t count toward the pro rata rule.

Timing matters. The pro-rata math is based on your IRA balances as of December 31 of the year you convert. If you plan to roll pre-tax IRA money into your 401(k) to clear the way, complete that rollover by December 31 of the same year you convert.

Mega Backdoor Roth 401(k) (for those with employer plans)

Step 1: Confirm Your 401(k) Plan Allows the Following:

  • After tax (non Roth) contributions
  • In-plan Roth conversions or in service distributions to a Roth IRA

Not all 401(k)s offer this. Ask your plan admin or HR rep.

Step 2: Understand the Limits (2026)

  • Total 401(k) limit = $72,000, or $80,000 if you are 50 or older ($72,000 plus the $8,000 catch-up). If you turn 60 to 63 during 2026 and your plan allows the higher catch-up, the total is $83,250.
  • Includes:
    • Employee contributions ($24,500 max)
    • Employer match
    • After tax contributions (your window)

Example:

If you contribute $24,500 and get $6,000 in employer match, you can contribute $41,500 more after tax into the 401(k).

Step 3: Make After Tax Contributions

  • Designate these extra contributions as after tax (not Roth) in your 401(k) portal.
  • Most providers have a setting or a separate contribution source.

Step 4: Convert to Roth

You have two choices:

Option A: In plan Roth conversion

  • Convert after tax 401(k) money to Roth 401(k) inside the plan.
  • Taxes only on any growth if converted quickly, likely minimal.

Option B: In service withdrawal to Roth IRA

  • Distribute after tax contributions (and gains) to your Roth IRA
  • Grows tax free from there

You must be allowed to do in service withdrawals while still employed

Step 5: Repeat Every Year

  • Mega Backdoor Roth can be done annually to maximize long term tax free growth.
  • Your plan will issue a Form 1099-R for each conversion or rollover. Nothing is wrong when it arrives; just include it with your tax documents so we report the conversion correctly.