At the end of Part 1: The Investing Order of Operations, I left two doors cracked open: the backdoor Roth and the mega backdoor Roth. If you read “income limits apply” on the Roth IRA step and felt locked out — this post is for you.
Because here’s the thing: the IRS didn’t lock the door. It just moved it.
First, a 60-Second Refresher on Why Roth Money Is Worth Chasing
Roth dollars are taxed once — now — and then never again. No tax on decades of growth. No tax on qualified withdrawals in retirement. No required minimum distributions forcing money out of a Roth IRA on the IRS’s schedule. That’s why high earners go through extra paperwork to get money into Roth accounts.
The catch: direct Roth IRA contributions phase out by income. For 2026:
| Filing status | Full contribution below | Phased out completely at |
|---|---|---|
| Single / Head of household | $153,000 MAGI | $168,000 |
| Married filing jointly | $242,000 MAGI | $252,000 |
Over those numbers? You can’t contribute directly. But “directly” is doing a lot of work in that sentence.
The Backdoor Roth IRA: Three Steps and a Form
There’s no income limit on contributing to a traditional IRA. And there’s no income limit on converting a traditional IRA to a Roth. Put those two facts together and you get the backdoor Roth:
1Contribute to a traditional IRA
Up to $7,500 for 2026 — as a nondeductible contribution (you don’t take the tax deduction).
2Convert it to a Roth IRA
Ideally soon after, before the money has time to grow much.
3File Form 8606 with your taxes
This documents the nondeductible contribution — it’s what tells the IRS you already paid tax on that money, so the conversion isn’t taxed again.
That’s it. It feels like it shouldn’t be allowed, but it is — this isn’t a gray area or a loophole someone found last week. It’s a well-established, widely used strategy. The work is in doing it cleanly.
⚠ The pro-rata rule is the trap. If you have any existing pre-tax money in traditional, SEP, or SIMPLE IRAs, the IRS treats all your IRA money as one pot. Your conversion gets taxed proportionally across the whole pot — you can’t just convert the “new” after-tax dollars. If you’ve got an old rollover IRA sitting around, talk to a tax professional before you convert. One common fix: roll that pre-tax IRA money into your current 401(k) first, emptying the pot.
The Mega Backdoor Roth: Same Idea, Bigger Door
The regular backdoor moves $7,500 a year. The mega backdoor can move multiples of that — but only if your 401(k) plan cooperates.
Here’s the math. For 2026, the limit on what you can defer into a 401(k) is $24,500. But the limit on what can go into the account in total — your deferrals plus employer match plus a third, lesser-known bucket called after-tax contributions — is $72,000.
Say you max your $24,500 and your employer kicks in $10,000. That leaves up to $37,500 of space that can be filled with after-tax contributions — if your plan allows them. Then you convert those after-tax dollars to Roth, either through an in-plan Roth conversion or a rollover to a Roth IRA, and they grow tax-free from there.
Two boxes your plan has to check:
✓ It allows after-tax (non-Roth) contributions. Not all plans do — check your plan documents or ask your administrator.
✓ It allows in-plan Roth conversions or in-service withdrawals. Without one of these, your after-tax money is stuck earning taxable growth until you leave the job.
Which Door Is Yours?
| Backdoor Roth IRA | Mega Backdoor Roth | |
|---|---|---|
| Who can use it | Anyone with earned income | Only if your 401(k) plan allows it |
| Annual ceiling (2026) | $7,500 | Up to the $72,000 combined limit, minus deferrals and match |
| Biggest pitfall | Pro-rata rule | Plan doesn’t support it / forgetting to convert |
| Paperwork | Form 8606 | Plan-level conversion or rollover |
A note on speed and honesty. Convert promptly — any earnings between contribution and conversion are taxable. And neither of these strategies is “advanced” in the sense of risky; they’re advanced in the sense of paperwork. If your situation has wrinkles (old IRAs, self-employment income, equity comp), this is exactly where a CPA or fee-only advisor earns their fee. I’m sharing the map, not filing your forms.
The Order Still Applies
These doors only matter once you’ve walked the earlier steps — match captured, high-interest debt gone, emergency fund built. If you skipped Part 1, start there. The backdoors are Step 6-and-a-half and Step 7-and-a-half, not shortcuts past the fundamentals.
Ready to figure out how these pieces fit your situation?
Book a Build Better Session →Enjoy the process. Stay grounded. Scale better.
— Laura
References
- Internal Revenue Service (2025). 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 — including 2026 Roth IRA income phase-out ranges. Notice 2025-67. irs.gov
- Internal Revenue Service. About Form 8606, Nondeductible IRAs. irs.gov
- Fidelity (2026). 401(k) contribution limits 2026 — combined employee and employer limit of $72,000. fidelity.com
All views expressed are my own. Nothing shared here is financial, legal, or professional advice... and AI is used ;)