2025 Version: Mega Backdoor Roth | How to Double Your 401k at Amazon, Microsoft, Meta, and Google

Updated for 2025: A mega backdoor Roth is funded within your 401(k) plan at work by contributing to the after-tax portion, and then electing the in-plan Roth conversion. This election automatically converts your after-tax dollars to Roth, making them grow tax-free forever!

The after-tax has a high maximum, allowing you to double your contributions into the plan (or more).

This video is made specifically for Amazon, Microsoft, Meta, and Google employees.

Transcript:

On today's video, we're going to talk about one of my favorite topics, the mega backdoor Roth. I'm Chris Kaminski, co-founder and partner here with Consilio Wealth, where we specialize in working with tech professionals at Amazon, Microsoft, Meta, and Google.

Mega backdoor Roth is the process of funding the after-tax portion of your 401k and then converting that after-tax portion over to the Roth side of your 401k. In most cases, you'll pay little to no taxes on that conversion and the contribution limits are high. Let's dive in. Let's say that you work at Microsoft and it's 2025. The max you might be thinking about is the pre-tax or Roth maximum, which here in 2025 is $23,500. In addition to that, you receive a 50% employer match, which is $11,750. That totals to $35,250.

But what you might not know is that you can get all the way up to $70,000 into your 401k in 2025. So, let's do the math. $70,000 total contributions minus the $23,500 limit, which you can elect to do either pre-tax or Roth or some combination of both, subtracting then the employer match of $11,750, leaves you with $34,750 left to again, total up to that $70,000.

This is the amount that you can put into the after tax 401k and that $34,750 contribution is the same if you work for Microsoft, Meta or Google. Amazon's a little bit different. Amazon has a 2% match, not a 50% up to the IRS limit match. And so that 2% match is based on the annual compensation limit, which is set by the IRS every year. In 2025, that limit is $350,000. So, your 2% match at Amazon based on a compensation limit according to the IRS at $350,000 is $7,000.

This is the basis for your after-tax contribution limit at Amazon. So, your amount is actually slightly higher because your match is slightly less. So doing the math now for Amazon employees, you take $70,000 minus that same $23,500 pre-tax or Roth minus your $7,000 max match amount equals $39,500 in the after-tax. Now, if you make less than $350,000 of a salary, you still are capped at this amount because that's how the plan passes its plan testing.

Lastly, if you're turning 50 this year, or if you are already 50 or over, you can add $7,500 to that first $23,500 amount pre-tax or Roth. So, your max pre-tax or Roth is $31,000 this year. In most cases, most companies don't match that. However, at Meta, they will, and so Meta will match those catch-up contributions of $7,500, again, up to that 50% max. But wait, there's more.

Starting here in 2025, Secure Act 2.0 opened up the ability for people ages 60 to 63, note that is four years, age 60, 61, 62, and 63. So four years, your catch up amount is not $7,500, it's actually 50% more than that. It's $11,250. Again, this is for people ages 60 to 63, those four tax years, you can put 50% more than the max catch up. This is a new rule that was opened up by Secure Act 2.0 starting here in 2025.

Your 401k plan generally does a pretty good job of alerting you of these types of things, but not always. Just take note that if you qualify for some of these special things that you adjust your 401k contributions accordingly so that you in fact max out. Okay, back to the after tax and this whole mega backdoor Roth thing. The most important step of this is you've got to enroll to actually convert those after tax contributions over to Roth. This is something called an in-plan Roth conversion. If your 401k is at Fidelity, like pretty much everybody except for Google.

You have a dropdown menu at the bottom of your contributions page. So, you're on the contributions page in your net benefits portal. You see your pre-tax, your Roth, your after tax, and then at the bottom, there's this little dropdown menu and it will default to saying, don't convert my after tax to Roth, and you want to drop down and you want to elect convert my after tax to Roth. This should just be an automatic thing, but generally it is defaulting to don't convert. So, this election enables that any dollars that go into the after-tax portion of your 401k get automatically swept over to the Roth side of the plan, and this is actually a daily in-plan sweep.

What's nice about that is that every time you get paid, money goes into your after-tax 401k and is automatically converted over to Roth. And since that's so fast, the money that's in the after-tax 401k doesn't get a chance to grow. It's the growth on the after tax with a later conversion that would cause tax. Example let's say you put $10,000 into your after-tax 401k and you convert it immediately to Roth. Now that $10,000 is going to grow tax free forever.

Let's say you put $10,000 into your 401k after tax, and you don't immediately convert it to Roth and it grows to $12,000. Now you convert it over to Roth and you have $2,000 of ordinary income that you have to recognize because you've now performed a Roth conversion, and that investment gain must become taxable income. So, the nice thing about these elections is that it just creates this automatic in-plan sweep that's run every single day and you have a very low chance of having any sort of tax related to one of these conversions. At Google, your plans at Vanguard, Vanguard's portal is not as user friendly, in my opinion, you go to the contributions page, you should see the ability to convert after tax to Roth. The Vanguard plan through Google actually has a neat benefit that has a spillover provision.

So, if you go over the max dollar amount in your pre-tax or Roth contribution, it'll automatically spill over those contributions into the after tax. If you elect to do so, you'll see all these options when you're enrolling in your contributions. Lastly, the IRS updates the limits that are discussed in this video, generally around November of every year for the upcoming year.

So, if you're curious about this, can start Googling it towards the end of the year and then maybe even in January, you can see what the new limits are. You can go into your contribution section and adjust your percentage or dollar contribution limits so that you hit the max in the upcoming year.

As a general best practice, we like clients to max over about 12 months versus putting a lot of money into their 401k plans and being done in say March or April of a year. It's just what we like to do. All right, you are now an expert on mega backdoor Roth’s at the four big tech companies, even though you probably only work for one of them.