By Carmine Coppola
Why High Earners Feel Stuck
If you are in your peak earning years, you know the drill. Every raise, every bonus, every stock vesting feels like a win until tax season arrives. For many executives, the frustration is real. You are working harder, achieving more, yet a significant portion of what you earn is gone before it even reaches your account.
At the same time, you probably want the peace of mind that comes with building tax free income for retirement. The Roth IRA has that appeal with tax free growth and tax free withdrawals. Then you discover that income limits shut you out of direct Roth contributions. It feels like a door slammed shut.
Here is the good news. There is a way to use your 401k to create meaningful Roth dollars without breaking the rules. It is called the mega backdoor Roth, and while the name sounds like something only accountants whisper about, the concept is surprisingly straightforward once explained.
Start with the Basics: Your Pre Tax 401k
The first step is one you may already know well. Contribute to your 401k. For 2025, you can put away up to $23,500 on a pre tax basis. If you are 50 or older, add another $7,500. If you are between 60 and 63, new legislation allows an expanded catch up of $11,250.
This is important for two reasons. One, you are saving for your future. Two, those contributions reduce your taxable income today. Many professionals stop here, thinking they have maxed out their opportunities. That is where the strategy takes an interesting turn.
The Often Overlooked Step: After Tax Contributions
Some 401k plans allow you to put in additional after tax contributions once you have hit your pre tax limit. These are different from Roth contributions. They are dollars you put in after taxes have already been paid.
Here is why this matters. The total 401k contribution limit for 2025 is $70,000. With catch ups, it can be $77,500 or more. That means that even after maxing your pre tax contributions, there is still room to put in significant additional dollars.
Many executives do not even realize this is possible. It is not a secret, but it is not something HR departments often highlight either. For those who qualify, this opens the door to a powerful next step.
Turning After Tax into Roth: The Mega Backdoor
Once you have after tax dollars in your 401k, the strategy is to move them into a Roth IRA or Roth 401k. Some plans allow this in plan, others require a rollover. Either way, this is what is known as the mega backdoor Roth.
The benefit is clear. Those after tax contributions now sit in a Roth account where growth is tax free and qualified withdrawals in retirement are also tax free. You have effectively created a large Roth balance without worrying about income restrictions while still preserving the tax deduction provided by your pretax contributions.
For high earners, this is one of the most effective ways to build tax free wealth at scale.
Why This Matters More Than Ever
Executives and professionals often feel boxed in. They want to save aggressively, but income restrictions or tax rules make it feel like there are no good options. The mega backdoor Roth changes that.
Think about the dual benefit. You reduce taxable income today through pre tax contributions, and you build a substantial Roth bucket for the future. That is flexibility. That is choice. It is one of the rare times in financial planning where you really can have both.
An Example in Action
Consider a 52 year old executive in New York. They contribute $23,500 pre tax plus $7,500 as a catch up. Their plan allows after tax contributions to reach the $70,000 annual limit. That means tens of thousands in additional savings are eligible to be rolled into a Roth account.
The result is meaningful tax savings today plus the creation of a Roth balance that can grow for decades. This is not about chasing returns. It is about understanding the rules and using them intentionally.
Important Caveats
Not every plan allows for after tax contributions or in plan Roth conversions. Some companies offer limited flexibility. Others require specific procedures. The details matter.
This is why you should always start by reviewing your plan documents. Talk with your HR or benefits team. Confirm what is allowed and what is not. It is also wise to coordinate with your CPA or tax advisor before making any moves.
Done correctly, this strategy is completely above board. Done carelessly, it could create confusion or unintended tax consequences.
Why Most People Have Never Heard of It
Despite being allowed under the rules, the mega backdoor Roth is not widely advertised. Most plan participants never hear about it. Many financial professionals do not bring it up either because it requires a bit more work and coordination.
That is a missed opportunity. When used thoughtfully, this strategy can change the way high earners approach retirement savings. It is an example of how small shifts in understanding can create outsized results.
Bringing Levity to the Complexity
I understand this can sound like alphabet soup. 401k, IRA, Roth, catch up. It is easy to feel like you need a finance degree just to navigate your own benefits. That is where I come in.
My role is to simplify. To translate this from jargon into something that makes sense. To show you the difference between what is theoretically possible and what is practical in your specific situation.
You do not need to know every line of tax law. You just need to understand enough to make smart decisions, then have someone you trust coordinate the details on your behalf.
Why This Strategy Resonates with My Clients
Most of the executives I work with are not looking for the next hot investment trend. They want peace of mind. They want to know they are not leaving money on the table. They want to feel like they are playing the same game as their peers, if not one step ahead.
The mega backdoor Roth fits that mindset. It is not about being flashy. It is about being intentional. It is about taking advantage of opportunities that others overlook.
The Bigger Picture
Retirement planning is not one dimensional. Income matters, yes. Investments matter. Taxes matter. What really matters is how all of it fits together.
The mega backdoor Roth is just one tool. It becomes powerful when combined with strategies around equity compensation, deferred income, and estate planning. The real advantage comes from integration and making sure all the moving parts are aligned.
Looking Ahead with Intention
If you are earning at a high level and feel like taxes are eating away at your progress, know that there are strategies designed for you. The mega backdoor Roth is one of the most compelling. It lets you take control, balance today’s tax relief with tomorrow’s flexibility, and create a retirement plan that reflects the complexity of your career.
This is not about doing more for the sake of doing more. It is about being intentional with the resources available to you. That is how you stop leaving money on the table and start building a plan that supports both your future lifestyle and your legacy.