Xinyi Cindy Yu, CPA/CFP

Partner of CINDIE CPA and EliteCPA P.C. http://www.cindiecpa.com

Unlocking a Powerful Retirement Strategy: The Mega-Backdoor Roth 巨额后门 Roth

For high-income earners who have maxed out their traditional retirement accounts, the Mega-Backdoor Roth is an advanced strategy that can significantly increase tax-free savings for retirement. Unlike a standard Roth IRA, which has strict income limits, the Mega-Backdoor Roth leverages an often-overlooked feature in many 401(k) plans to allow for massive after-tax contributions that are then converted into a Roth account.

1. Eligibility: Who Can Use This Strategy?

The Mega-Backdoor Roth is not a universally available option. It hinges on the specific features of your employer-sponsored retirement plan. To be eligible, your 401(k), 403(b), or 457 plan must allow for two critical components:

• After-Tax Contributions: Your plan must permit you to make after-tax contributions beyond the regular employee deferral limit (the standard pre-tax or Roth 401(k) contributions).
• In-Service Distributions or Conversions: The plan must allow you to either take “in-service” distributions (withdrawals while you are still employed) of these after-tax funds or perform an “in-plan” conversion, moving the after-tax money directly into a Roth 401(k) within the same plan.

It is essential to check with your human resources department or plan administrator to confirm if these features are available in your plan. If your plan does not allow in-service distributions or conversions, you may have to wait until you leave your job to execute the conversion, which could result in a significant tax bill on any earnings that have accrued in the after-tax portion of your account.

2. The Flow of the Mega-Backdoor Roth

The process is a two-step maneuver that takes advantage of the total annual contribution limit for defined contribution plans. This limit is much higher than the employee elective deferral limit. Here is a step-by-step breakdown:

1. Maximize Your Standard Contributions: First, you must max out your regular employee contributions to your 401(k). This can be a pre-tax or Roth 401(k) contribution, up to the annual limit ($23,500 in 2025, with higher catch-up limits for those age 50 and over).
2. Make After-Tax Contributions: Once you have reached the employee deferral limit, you then make additional contributions to your 401(k) on an after-tax basis. The maximum you can contribute here is the difference between the total annual contribution limit for your plan ($70,000 in 2025) and the sum of your employee contributions and any employer contributions (e.g., matching funds).For example, if you contribute the maximum employee deferral of $23,500 and your employer matches $10,000, you could potentially contribute up to $36,500 ($70,000 – $23,500 – $10,000) in after-tax dollars.
3. Perform the Conversion: The final and most crucial step is to convert the after-tax contributions into a Roth account. This is typically done as soon as possible after the contributions are made to minimize any investment gains in the after-tax portion, which would be taxable upon conversion. The conversion can be either:
   • To a Roth IRA: You roll the after-tax funds out of your 401(k) and into a separate Roth IRA.
   • To a Roth 401(k): If your plan offers an in-plan Roth conversion, you can move the funds into a Roth 401(k) within the same plan.

Once the funds are in a Roth account, they can grow tax-free, and qualified withdrawals in retirement will also be tax-free.

3. Mega-Backdoor Roth vs. Backdoor Roth IRA

While both strategies are designed to help high-income earners save more in Roth accounts, they target different contribution limits and mechanisms.

Feature	Mega-Backdoor Roth	Backdoor Roth IRA
Primary Goal	To supercharge Roth savings using high 401(k) contribution limits.	To bypass income limits for direct Roth IRA contributions.
Annual Limit	The total 401(k) contribution limit ($70,000 in 2025) minus employee and employer contributions.	The annual IRA contribution limit ($7,000 in 2025).
Mechanism	Making after-tax contributions to a 401(k) and converting them to a Roth IRA or Roth 401(k).	Making a non-deductible contribution to a traditional IRA and converting it to a Roth IRA.
Eligibility	Dependent on specific 401(k) plan features (after-tax contributions and in-service distributions/conversions).	Anyone with earned income, regardless of income level, as long as they don’t have pre-tax money in other traditional IRAs (due to the pro-rata rule).

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The key difference is the scale. A Backdoor Roth IRA allows a person to contribute a modest amount each year, whereas the Mega-Backdoor Roth can be used to funnel tens of thousands of dollars into a Roth account, making it a much more powerful tool for accumulating tax-free wealth.

4. Institutions Offering Mega-Backdoor Roth

The availability of a Mega-Backdoor Roth strategy is determined by your employer’s plan, not the financial institution itself. The plan provider simply facilitates the features that the employer has chosen to include. However, certain companies are well-known for offering this valuable benefit to their employees. This is a crucial detail to consider when evaluating a job offer, especially for high earners.

While a comprehensive list is difficult to maintain as plan details can change, major financial institutions that serve as 401(k) plan administrators, such as Fidelity Investments, Vanguard, and Charles Schwab, can often support the administrative functions required for a Mega-Backdoor Roth, provided the employer’s plan is set up to allow it.

Additionally, some specialized companies and financial advisors, like IRA Financial, focus on helping self-employed individuals and small business owners set up Solo 401(k) plans that are explicitly designed to enable the Mega-Backdoor Roth strategy.

Ultimately, whether you can use a Mega-Backdoor Roth is a matter of checking with your employer and ensuring your plan has the right features. If so, it can be a highly effective way to turbocharge your tax-free retirement savings.

For more details, please consult a tax professional. The presentation was prepared by Xinyi Cindy Yu, Partner at CINDIE and EliteCPA P.C., cindy.yu@cindiecpa.com, located at 200 Centennial Ave, Suite 106, Piscataway, NJ 08854

开启强大的退休策略：巨额后门 Roth

对于那些已经将传统退休账户存满的高收入人群来说，“巨额后门 Roth”（Mega-Backdoor Roth）是一种先进的策略，可以显著增加免税的退休储蓄。与有严格收入限制的标准 Roth IRA 不同，“巨额后门 Roth”利用许多 401(k) 计划中一个常被忽视的功能，允许进行大量的税后供款，然后将其转换到 Roth 账户中。

1. 资格：谁可以使用此策略？

“巨额后门 Roth”并非普遍可用的选项。它取决于你的雇主赞助的退休计划的具体功能。要符合资格，你的 401(k)、403(b) 或 457 计划必须允许两个关键组成部分：

• 税后供款（After-Tax Contributions）： 你的计划必须允许你在常规员工供款限额（标准的税前或 Roth 401(k) 供款）之外，进行税后供款。
• 在职分发或转换（In-Service Distributions or Conversions）： 该计划必须允许你提取这些税后资金的“在职分发”（即在职期间的提款），或执行“计划内转换”，将税后资金直接转入同一计划内的 Roth 401(k) 账户。

与你的人力资源部门或计划管理员确认这些功能是否在你的计划中可用至关重要。如果你的计划不允许在职分发或转换，你可能需要等到离职后才能执行转换，这可能会导致税后部分账户中产生的任何收益产生高额税单。

2. “巨额后门 Roth”的流程

这个过程是一个两步操作，利用了“固定供款计划”（defined contribution plans）的总年度供款上限。这个上限远高于员工自主供款的上限。以下是分步详解：

1. 最大化标准供款： 首先，你必须将常规的 401(k) 员工供款存满。这可以是税前或 Roth 401(k) 供款，最高可达年度限额（2025 年为 $23,500，50 岁及以上的人有更高的追加供款限额）。
2. 进行税后供款： 一旦达到员工供款限额，你就可以在税后基础上向你的 401(k) 进行额外供款。这里的最高供款额是你的计划总年度供款上限（2025 年为 $70,000）与你的员工供款和任何雇主供款（例如，匹配资金）之和的差额。 例如，如果你供款了最高员工供款额 $23,500，并且你的雇主匹配了 $10,000，那么你理论上可以供款高达 $36,500（$70,000 – $23,500 – $10,000）的税后资金。
3. 执行转换： 最后、也是最关键的一步，是将税后供款转换成 Roth 账户。这通常在供款后尽快完成，以最小化税后部分产生的任何投资收益，因为这部分收益在转换时需要纳税。转换可以有以下两种方式：
   • 转入 Roth IRA： 你将税后资金从你的 401(k) 中转出，并转入一个独立的 Roth IRA。
   • 转入 Roth 401(k)： 如果你的计划提供“计划内 Roth 转换”功能，你可以将资金转入同一计划内的 Roth 401(k)。

一旦资金进入 Roth 账户，它们就可以免税增长，并且退休时的合格提款也将是免税的。

3. “巨额后门 Roth”与“后门 Roth IRA”的简要比较

虽然这两种策略都旨在帮助高收入人群在 Roth 账户中存入更多资金，但它们针对不同的供款限额和机制。

特征	巨额后门 Roth	后门 Roth IRA
主要目标	利用高 401(k) 供款限额来大幅增加 Roth 储蓄。	绕过 Roth IRA 直接供款的收入限制。
年度限额	401(k) 总供款限额（2025 年为 $70,000）减去员工和雇主供款。	年度 IRA 供款限额（2025 年为 $7,000）。
机制	向 401(k) 进行税后供款，并将其转换为 Roth IRA 或 Roth 401(k)。	向传统 IRA 进行不可抵扣供款，并将其转换为 Roth IRA。
资格	取决于特定的 401(k) 计划功能（税后供款和在职分发/转换）。	任何有劳动收入的人，无论收入水平如何，只要他们的其他传统 IRA 中没有税前资金（由于按比例分配规则）。

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主要区别在于规模。“后门 Roth IRA”每年允许供款适度的金额，而“巨额后门 Roth”可以用来将数万美元的资金存入 Roth 账户，使其成为一个积累免税财富的更强大工具。

4. 提供“巨额后门 Roth”的机构

“巨额后门 Roth”策略的可用性取决于你的雇主计划，而不是金融机构本身。计划提供商只是为雇主选择的功能提供便利。然而，一些公司因向其员工提供这一宝贵福利而闻名。这在评估工作机会时是一个重要的细节，特别是对于高收入者而言。

虽然由于计划细节可能随时更改，很难维护一个全面的列表，但一些主要的金融机构，如 Fidelity Investments、Vanguard 和 Charles Schwab，作为 401(k) 计划管理员，只要雇主的计划设置为允许，通常都可以支持“巨额后门 Roth”所需的管理功能。

此外，一些专业公司和金融顾问，如 IRA Financial，专注于帮助自雇人士和小型企业主建立 Solo 401(k) 计划，这些计划被明确设计来启用“巨额后门 Roth”策略。

总而言之，你是否可以使用“巨额后门 Roth”取决于你与雇主确认并确保你的计划具备正确的功能。如果具备，它将是大幅加速你的免税退休储蓄的非常有效的途径。