Roth conversions, the backdoor, and the mega backdoor — what they are and who they're for

Some of the best tax moves I've seen in 20 years are ones the client had no idea they could make.

That's how it goes with retirement money. You don't know what you don't know, and the door is often right in front of you.

Roth conversions, the backdoor Roth, and the mega backdoor Roth are three of those doors. They all point at the same thing, which is money that grows and comes out tax-free later.

I want to walk through what each one is, how it works, and who it tends to fit. Then you can decide if any of them apply to you.

Why Roth money is worth it

A Roth account is money you've already paid tax on. It grows tax-free, and you pull it out tax-free in retirement.

A Roth IRA also has no required distributions during your lifetime. So the money can sit and grow as long as you want, and you control when it comes out.

In my experience, that control is where the peace comes from. When some of your retirement money is already tax-free, a tax hike or a big income year doesn't rattle you the same way.

Door 1 — The Roth conversion

A conversion is when you move money from a traditional IRA or 401(k) into a Roth. You pay the tax on what you move now, and everything after that grows tax-free.

The catch is the tax bill. Whatever you convert gets added to your income for the year, so timing matters.

In my experience, the best window is a lower-income year. Early retirement before Social Security starts, or a year your income dips, is often when a conversion costs the least.

You don't have to convert it all at once either. Many people convert a piece each year, enough to fill up a lower tax bracket without spilling into the next one.

Door 2 — The backdoor Roth

There's an income limit on who can put money straight into a Roth IRA. For 2026, the cutoff starts at $153,000 for a single filer and $242,000 for a married couple filing jointly.

So if you earn above that, the front door is closed. The backdoor is how you get in anyway.

Here's how it works. You put money into a traditional IRA, which has no income limit, and then you convert it to a Roth.

For 2026 that's up to $7,500, or $8,600 if you're 50 or older. It's the same contribution, just routed through the side door.

One thing to watch is the pro-rata rule. If you already have pre-tax money sitting in traditional IRAs, the conversion gets taxed proportionally, so it's not as clean.

This is worth a conversation before you do it.

Door 3 — The mega backdoor Roth

This one is the biggest door, and the one most people have never heard of. It lives inside your 401(k).

Most people know the regular 401(k) limit. For 2026 you can put in $24,500 of your own money, or $32,500 if you're 50 and older.

But the total that can go into a 401(k) in 2026 is $72,000, counting your contributions plus anything your employer adds. The gap between what you put in and that $72,000 is the opening.

Some plans let you fill that gap with after-tax contributions, then convert them to Roth right inside the plan. That's the mega backdoor, and it can move a lot more money into Roth than the other two.

The whole thing depends on your plan allowing it. Not every 401(k) does, so the first step is simply checking.

The honest part

None of these are free. A conversion means a tax bill today in exchange for tax-free money later, and that trade has to make sense for your situation.

I'm a realist. I plan for the worst and hope for the best, so I'd rather show you the real cost up front than sell you on the upside.

Timing is everything here. At the wrong time a conversion pushes you into a higher bracket or raises what you pay for Medicare, and at the right time it saves you a lot over a full retirement.

Who these tend to fit

1. High earners over the Roth income limit. The backdoor and the mega backdoor are usually how you get Roth money at all.

2. Pre-retirees in their 50s and early 60s. This is the window where conversions in lower-income years can do the most work.

3. Retirees before required distributions and Social Security kick in. A few well-timed conversions here can lower the tax you pay for the rest of retirement.

   
   

One more thing

Every situation is personal. The right move depends on your income, your accounts, your timeline, and what you want the money to do for you.

That's the part I can't put in an article, because it's a conversation. If any of these doors sound like they might be yours, reach out and we'll figure out which one fits and when to walk through it.

This commentary is provided for general information purposes only, should not be

construed as investment, tax or legal advice, and does not constitute an attorney/client

relationship. Past performance of any market results is no assurance of future

performance.

Securities and investment advisory services offered through Osaic Wealth,

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