By Jonathan Hall, BA, MBA, MSFS, CFP®
Roth accounts can be powerful tax planning tools. They offer the promise of tax-free growth and withdrawals in retirement. Yet many high earners are locked out of contributing directly to a Roth IRA because of income limits. That doesn’t mean Roths are off the table.
With a little planning, there are ways to work around those restrictions. Some of the most effective strategies are the backdoor Roth and the mega backdoor Roth. They’re not the only options. High earners who want to build tax-free retirement income need to know the full range of possibilities.
Let’s walk through the most relevant Roth strategies for those in higher tax brackets.
Backdoor Roth IRA
If your MAGI is $165,000 or more (single) or $246,000 or more (married filing jointly) in 2025, you are ineligible to contribute directly to a Roth IRA. Contributions begin to phase out between $150,000–$165,000 for single filers and between $236,000–$246,000 for joint filers.
Here’s how it works:
1. Contribute to a traditional IRA. Anyone with earned income can make a nondeductible contribution, regardless of income level.
2. Convert the funds to a Roth IRA. There are no income limits for Roth conversions
3. Pay tax only on pre-tax amounts.
The backdoor Roth is conceptually simple, but it comes with a catch. The IRS will apply the pro-rata rule if you have other traditional, SEP, or SIMPLE IRA balances. This means a portion of your conversion will be considered taxable. Many high earners keep their IRA balances at zero to avoid this issue, often by rolling pre-tax IRA assets into a 401(k) if the plan allows it.
Mega Backdoor Roth
If your 401(k) plan allows after-tax contributions and in-plan Roth conversions or in-service distributions, you may be eligible for the mega backdoor Roth. This strategy can allow contributions of up to $70,000 in 2025 (or $77,500 if age 50 or older), including employee deferrals, employer matches, and after-tax contributions.
Beginning in 2025, those aged 60 to 63 can make a special catch-up contribution equal to the greater of $10,000 or 150% of the standard $7,500 catch-up. For 2025, this allows a catch-up contribution of $11,250, which replaces the regular $7,500 catch-up for this age group and is added to the $23,500 deferral limit. The amount available for mega backdoor Roth contributions depends on how much of this total is already used by your regular 401(k) deferrals and employer contributions.
Here’s how it works:
1. Max out your standard 401(k) deferrals ($23,500 in 2025, or $31,000 if you’re 50 or older).
2. Make additional after-tax contributions to your 401(k) so that total contributions—including employee deferrals, employer contributions, and catch-up, do not exceed $70,000 (or $77,500 if age 50 or older, including up to $11,250 for those age 60 to 63).
3. Convert the after-tax contributions in-plan to a Roth 401(k) or via in-service distribution to a Roth IRA.
This is an exceptionally powerful strategy. It allows high earners to get much more into a Roth account than the regular $7,000 IRA contribution limit or even the $23,500 401(k) Roth deferral limit.
The key is having the right plan features. Not all 401(k) plans permit after-tax contributions or allow in-plan Roth conversions. If yours does, the mega backdoor Roth can become one of the most valuable parts of your long-term tax planning strategy.
Roth 401(k)s
Many high earners default to making pre-tax 401(k) contributions to reduce their taxable income. While this is a sound strategy for some, the Roth 401(k) option deserves more consideration.
Roth 401(k)s have no income limits. You can contribute up to $23,500 in 2025 ($31,000 with catch-up) regardless of your earnings. If your plan allows, and you are age 60-63, you can contribute an additional $11,250 in 2025 instead of the standard $7,500 catch-up contribution.
These contributions are made with after-tax dollars, but withdrawals are tax-free in retirement if the account is held for at least five years and you are over age 59½.
Roth contributions may make sense if you expect to be in a higher tax bracket in retirement. They can also reduce your exposure to required minimum distributions (RMDs) if you later roll your Roth 401(k) into a Roth IRA, which is not subject to RMDs.
Diversifying your tax exposure across pre-tax and Roth accounts gives you more flexibility in retirement. For some high earners, allocating a portion of 401(k) contributions to Roth can be a strategic move even if it increases current tax liability.
