You have heard your colleagues talk about this “Mega Back Door Roth” thing? Or perhaps you read about it here on FAANG FIRE and thought it was some exotic, complicated, advanced strategy. I’m here today to tell you that it’s one of the easiest things you can do.
Amazon has the same option as Meta via Fidelity to automatically convert to Roth without needing to call. They have the same " ROTH IN PLAN CONVERSION " section at the bottom with an option of "Convert After-tax to Roth".
Awesome! I don't know why Fidelity doesn't have this enabled for all their accounts. I don't get the incentives they have to not make it easy. I am sure there is some hidden regulatory lift that I am unaware of that causes the difference.
This is such a valuable piece. I had no idea this existed until you started posting about it. My wife works for EA, and it looks like they allow it. So many years of missed massive Roth contributions...sigh. Thank you.
I've always resisted contributing to a retirement fund using after-tax dollars--I expect my tax bracket to be lower in retirement than it is now.
Provided I buy a stock and hold, so don't incur cap gains during the investment period, I'm also not paying tax on the investment.
Am I missing something about the benefit of a Roth in this circumstance? Perhaps the assumption is that investment accounts do more active trading of securities, and so incur cap gains every time I move from one stock to another?
The $10 you put in the after-tax would be the same $10 that go in your taxable account. So regardless of whether you choose After-Tax or Taxable, you pay the tax. Now, the benefit of the After-Tax (once it gets into the Roth) you never pay any additional taxes on that ever. While the Taxable account will see you paying taxes on dividends and on the capital gains when you eventually sell the underlying assets.
So I would lean prioritizing that after-tax account as much as you can if you have the excess savings and it is for the long term.
Thanks for the simplest explanation I could find on the internet! I just started contributing, and I have a question. Does after-tax contribution go into a Roth-401k or Roth-IRA?
At Meta does contributing to the MBDR automatically create a new Roth 401k account, or is the money somehow marked as "Roth" within the existing 401k account?
It is within the existing account. They track it for you, Fidelity just doesn’t make it easy to see. I believe if you click on see more under the sources or holdings pie chart within net benefits you can see the breakdown.
One thing you could do it invest in different funds within the Roth funds to make it easier to track.
I just came upon this post and am trying to understand this a bit more. What is the additional 11.5k you mentioned on point (1)? My understanding is, there is a max of 23k allowed for pre-tax 401k and so, we put 11.5k while Meta/Google etc match upto 11.5k.
After this is maxed out, there is an overall max of 69k set by the IRS, so we are free to choose 69k - 23k for whichever mechanism we choose to put into (hence the 69-23 = 46k) right?
Think of it as a separate % that only applies to your work bonuses, not to normal paycheck. It isn’t required if you don’t want to fund via your bonus.
Hi Andre - This is super helpful! Quick question. If I only have the ability to put in $23K for the 401K, would you suggest putting it into the traditional pre-tax 401K or Roth 401K? Leaning towards the later since not having the deduction won't change my tax bracket and I can let it grow without having to pay any future tax on the gains.
There are lots of different factors at play when deciding the split on pre/roth. If I was in a state without income taxes and early career leaning into Roth 401k wouldn't be a bad idea. It probably would end up as wash one way or the other. Not worth overthinking too much. Again, lots of variables.
Hi Steven - I know I'm late to the game here since you asked this two months ago but wanted to chime in anyway if it would help. Generally speaking it makes more sense to make the pre-tax 401k contribution and take the deduction if you're a high earner. Even if it won't change your marginal tax bracket, you'll still benefit from the deduction.
For instance, if you're in the 35% tax bracket, contributing $23,000 to the pre-tax 401k reduces your taxable income by that amount, all else equal (even though you're still in the 35% bracket), meaning you pay $23,000 x 35% = $8,050 less in fed tax. Getting money into a Roth when you otherwise couldn't (due to high income) is nice, but when the trade-off is not getting the 401k deduction, you're "paying" tax at your current marginal rate to get the money into the Roth now. As a high earner, there's less of a chance you'll be in a higher bracket when you ultimately withdraw the Roth money in retirement, since you're contributing at the 35% bracket (in this example).
If I start a business that barely makes any money (ex $3500 the first year) can I still open a Solo 401K that allows after-tax contributions and max out after-tax contributions 69K ? Even though the business only made $3500, I can still put 69K into the after-tax Solo 401K ??? If so, I'm about to open up a business :)
You can only contribute the after tax proceeds (or something to that effect). I only contribute after I have started my taxes so I know how much I can contribute. I wish you could just blast in $69k.
That's such a bummer. My other deep dive right now is about my next house hack. I want to provide 'substantial services' to long-term tenants to get that income reported on schedule C and hopefully unlock all my passive real estate losses and make them active lol. I'm like 7 hours into that right now haha
Way past that lol. I'm going to try and pay for some RE tax consultations with the right CPA's soon. But if I can just have one STR bedroom in my home, and then have all the rest of my real estate recharacterized as active lol.... suddenly it's worth it. I geek out on this stuff. Thanks for responding! And great article
I'm referring to the withdraw of contributions. A couple of questions in different scenarios:
1. Can I withdraw the contributions from a Roth 401K or Roth IRA at any time? What are the any rules/limitations I need to follow?
2. In the case I convert from after-tax 401K to Roth IRA every quarter, for example 10K originally contributions + 2K growth over the quarter, what would be considered as the contribution vs. growth in the Roth IRA account? Would the contribution be still 10K, or would it be everything I converted (10K + 2K after tax) ?
1. My understanding is that you can withdraw Roth Contributions (401k or IRA) at anytime tax and penalty free. There is a separate 5 year wait that would apply to Roth Conversions (applies to normal backdoor roth contributions).
2. The contribution would be the $10k (the conversion is a separate process that doesn't count towards any limits). If the balance grew from $10k to $12k prior to the conversion, the $2k growth would be taxed.
Thank you for explaining this! I just started contributing (a small % for now) to the after-tax contributions!
Amazon has the same option as Meta via Fidelity to automatically convert to Roth without needing to call. They have the same " ROTH IN PLAN CONVERSION " section at the bottom with an option of "Convert After-tax to Roth".
Awesome! I don't know why Fidelity doesn't have this enabled for all their accounts. I don't get the incentives they have to not make it easy. I am sure there is some hidden regulatory lift that I am unaware of that causes the difference.
I'm starting 2026 updating my after-tax contribution to 1%. NVIDIA has the same option on Fidelity as Meta.
I've heard this Backdoor Roth term in the past but wasn't sure how to implement it, thanks for sharing this :D
Boom! Starting 2026 off strong!!!
Is there a way back to contributing to a MBDR if I've rolled a 401k into an IRA (and a Roth IRA) from previous employers?
Yes. No issues. That only becomes an issue with the normal back door Roth, not mbdr.
This is such a valuable piece. I had no idea this existed until you started posting about it. My wife works for EA, and it looks like they allow it. So many years of missed massive Roth contributions...sigh. Thank you.
Great stuff, thanks! Just shared inside Meta.
I've always resisted contributing to a retirement fund using after-tax dollars--I expect my tax bracket to be lower in retirement than it is now.
Provided I buy a stock and hold, so don't incur cap gains during the investment period, I'm also not paying tax on the investment.
Am I missing something about the benefit of a Roth in this circumstance? Perhaps the assumption is that investment accounts do more active trading of securities, and so incur cap gains every time I move from one stock to another?
I think you might be missing a piece.
The $10 you put in the after-tax would be the same $10 that go in your taxable account. So regardless of whether you choose After-Tax or Taxable, you pay the tax. Now, the benefit of the After-Tax (once it gets into the Roth) you never pay any additional taxes on that ever. While the Taxable account will see you paying taxes on dividends and on the capital gains when you eventually sell the underlying assets.
So I would lean prioritizing that after-tax account as much as you can if you have the excess savings and it is for the long term.
Thanks for the perspective!
Is this still a no brainer for someone who might move to home country in the long run ?
This depends on the country and the tax treaties in place! I have a few posts on the topic (where I bright in an expert, since I’m more familiar with US): https://www.faangfire.com/p/fire-planning-while-on-visa
Awesome visuals with the lime green guacamole look and drop shadow!
FYI my wife works at Air BNB we set it up for her which requires a call to set up and change any contributions!
Thanks for the simplest explanation I could find on the internet! I just started contributing, and I have a question. Does after-tax contribution go into a Roth-401k or Roth-IRA?
Glad this helped! Default that I have seen will be Roth 401k. Some employers allow you to manually roll it into a Roth IRA (meta allowed this).
Thank you Andre, helpful to know that. And after rollover, do new contributions go in that account or I need to periodically keep rolling it over?
I think you would need to do it manually.
At Meta does contributing to the MBDR automatically create a new Roth 401k account, or is the money somehow marked as "Roth" within the existing 401k account?
It is within the existing account. They track it for you, Fidelity just doesn’t make it easy to see. I believe if you click on see more under the sources or holdings pie chart within net benefits you can see the breakdown.
One thing you could do it invest in different funds within the Roth funds to make it easier to track.
I just came upon this post and am trying to understand this a bit more. What is the additional 11.5k you mentioned on point (1)? My understanding is, there is a max of 23k allowed for pre-tax 401k and so, we put 11.5k while Meta/Google etc match upto 11.5k.
After this is maxed out, there is an overall max of 69k set by the IRS, so we are free to choose 69k - 23k for whichever mechanism we choose to put into (hence the 69-23 = 46k) right?
You are missing one piece! The $23k does not include the company match.
What is After-Tax Bonus Election and is any % required there to properly set up a mega backdoor roth?
Think of it as a separate % that only applies to your work bonuses, not to normal paycheck. It isn’t required if you don’t want to fund via your bonus.
Hi Andre - This is super helpful! Quick question. If I only have the ability to put in $23K for the 401K, would you suggest putting it into the traditional pre-tax 401K or Roth 401K? Leaning towards the later since not having the deduction won't change my tax bracket and I can let it grow without having to pay any future tax on the gains.
There are lots of different factors at play when deciding the split on pre/roth. If I was in a state without income taxes and early career leaning into Roth 401k wouldn't be a bad idea. It probably would end up as wash one way or the other. Not worth overthinking too much. Again, lots of variables.
Hi Steven - I know I'm late to the game here since you asked this two months ago but wanted to chime in anyway if it would help. Generally speaking it makes more sense to make the pre-tax 401k contribution and take the deduction if you're a high earner. Even if it won't change your marginal tax bracket, you'll still benefit from the deduction.
For instance, if you're in the 35% tax bracket, contributing $23,000 to the pre-tax 401k reduces your taxable income by that amount, all else equal (even though you're still in the 35% bracket), meaning you pay $23,000 x 35% = $8,050 less in fed tax. Getting money into a Roth when you otherwise couldn't (due to high income) is nice, but when the trade-off is not getting the 401k deduction, you're "paying" tax at your current marginal rate to get the money into the Roth now. As a high earner, there's less of a chance you'll be in a higher bracket when you ultimately withdraw the Roth money in retirement, since you're contributing at the 35% bracket (in this example).
If I start a business that barely makes any money (ex $3500 the first year) can I still open a Solo 401K that allows after-tax contributions and max out after-tax contributions 69K ? Even though the business only made $3500, I can still put 69K into the after-tax Solo 401K ??? If so, I'm about to open up a business :)
You can only contribute the after tax proceeds (or something to that effect). I only contribute after I have started my taxes so I know how much I can contribute. I wish you could just blast in $69k.
That's such a bummer. My other deep dive right now is about my next house hack. I want to provide 'substantial services' to long-term tenants to get that income reported on schedule C and hopefully unlock all my passive real estate losses and make them active lol. I'm like 7 hours into that right now haha
You are an hour away from getting sucked into the short term rental loophole gurus.
Way past that lol. I'm going to try and pay for some RE tax consultations with the right CPA's soon. But if I can just have one STR bedroom in my home, and then have all the rest of my real estate recharacterized as active lol.... suddenly it's worth it. I geek out on this stuff. Thanks for responding! And great article
Can you please also talk about the withdraw of Roth IRA? That part is always confusing.
Can you explain what you are referring to when you mention “withdraw”?
Thanks for the fast response!
I'm referring to the withdraw of contributions. A couple of questions in different scenarios:
1. Can I withdraw the contributions from a Roth 401K or Roth IRA at any time? What are the any rules/limitations I need to follow?
2. In the case I convert from after-tax 401K to Roth IRA every quarter, for example 10K originally contributions + 2K growth over the quarter, what would be considered as the contribution vs. growth in the Roth IRA account? Would the contribution be still 10K, or would it be everything I converted (10K + 2K after tax) ?
Thank you!
1. My understanding is that you can withdraw Roth Contributions (401k or IRA) at anytime tax and penalty free. There is a separate 5 year wait that would apply to Roth Conversions (applies to normal backdoor roth contributions).
2. The contribution would be the $10k (the conversion is a separate process that doesn't count towards any limits). If the balance grew from $10k to $12k prior to the conversion, the $2k growth would be taxed.