During my years at Johnson & Johnson, I did not realize that my retirement plan offered this additional Roth-saving opportunity.
For 17 years, I worked at Johnson & Johnson and participated in the company retirement plan.
I understood the traditional choices. I could make pre-tax contributions and receive a tax benefit today, or make Roth contributions and potentially receive qualified distributions that are not subject to federal income tax when the applicable requirements are met.
I also remember seeing an option to contribute additional after-tax money.
My reaction was straightforward: Why would I put after-tax money into a retirement account?
I could already invest after-tax dollars in a brokerage account, where the money would remain accessible. I did not understand what additional benefit the retirement plan might provide.
What I missed was a second step. Under the plan provisions available during at least part of my time at J&J, eligible after-tax contributions could be moved into Roth savings. That combination is commonly called a mega backdoor Roth.
Looking back, it may have allowed me to move some of the long-term money I was placing in a brokerage account into a Roth account instead. It would not necessarily have been right for every dollar, but it was a planning tool I did not know I had.
What is a mega backdoor Roth?
The name makes the strategy sound more complicated than the basic idea.
A workplace retirement plan may allow three different types of employee contributions:
· Pre-tax 401(k) contributions
· Roth 401(k) contributions
· Voluntary after-tax contributions that are not Roth contributions
The third category is the one that creates the opportunity.
If the plan permits it, the participant contributes after-tax dollars and then moves those dollars into a Roth account through either an in-plan Roth conversion or an in-service rollover to a Roth IRA. The conversion or rollover is generally completed promptly so that relatively little taxable investment growth accumulates before the money reaches the Roth account. [2][3]
The plan must support both parts of the process. Allowing Roth 401(k) contributions does not, by itself, mean that the plan supports a mega backdoor Roth.
The numbers show why the strategy can matter
For 2026, the regular employee contribution limit for most 401(k) plans is $24,500. The overall defined-contribution-plan limit is $72,000 before applicable catch-up contributions. [1]
The larger $72,000 limit generally includes regular employee pre-tax or Roth contributions, employer contributions and voluntary after-tax employee contributions.
In a simplified example, someone who contributes the full $24,500 and receives $12,000 from an employer would have as much as $35,500 of potential remaining room under the $72,000 limit. If there were no employer contribution, the theoretical remaining room could be $47,500.
Actual capacity may be lower because of compensation, employer contributions, plan-specific limits, nondiscrimination testing and other additions to the account. The plan administrator must confirm the available amount.
For 2026, plans may also permit an $8,000 catch-up contribution for participants age 50 or older. A higher $11,250 catch-up applies for participants who turn ages 60 through 63 during the year. [1]
The scale is very different from a regular Roth Individual Retirement Account (IRA), which has a $7,500 contribution limit in 2026 before the $1,100 age-50 catch-up. [1]
The step I did not understand
My confusion at J&J was reasonable. An after-tax 401(k) contribution is not automatically a Roth contribution.
If the money simply remains in the after-tax portion of the plan, there is no current tax deduction. The original after-tax contribution generally will not be taxed again when distributed, but its investment earnings are generally pre-tax and may be taxable when withdrawn. [3]
The account may still provide plan-level benefits, such as institutional investment options, tax-deferred earnings and plan-specific rules that differ from those of a taxable brokerage account. But without the Roth conversion or rollover, it does not receive the same potential treatment as Roth money.
The feature I had overlooked was the ability to move eligible after-tax dollars into Roth savings. Once in the Roth account, future qualified distributions, including earnings, generally are not subject to federal income tax when the applicable requirements are met. [2]
That was the missing piece. The after-tax contribution was not necessarily the destination. It could be the first step toward additional Roth savings.
Where might it fit in the savings order?
There is no universal order that works for every household. Emergency savings, debt, near-term spending, taxes, employer benefits and the need for accessible money all matter.
For someone with adequate liquidity who is already saving more than the regular 401(k) limit, one possible sequence for long-term savings could be:
1. Make enough regular 401(k) contributions to receive the full employer contribution.
2. Increase regular pre-tax or Roth 401(k) contributions toward the employee limit, based on the household tax situation.
3. Evaluate whether additional Roth savings through a mega backdoor Roth fits the plan.
4. Use a taxable brokerage account for additional savings and for money that needs greater flexibility and accessibility.
That is not a recommendation to place every available dollar into a retirement account. A brokerage account has no retirement-plan contribution limit and can be important for a home purchase, early retirement, business needs or other goals before traditional retirement age.
Why are more people not using it?
First, most households are not yet maximizing the regular employee 401(k) limit. A mega backdoor Roth generally becomes relevant only after someone has the cash flow to save beyond that amount.
That makes it most applicable to higher-income earners who are living below their means and have already addressed more immediate financial priorities.
Second, not every retirement plan allows voluntary after-tax contributions. Among the plans that do, not all permit an in-plan Roth conversion or an in-service rollover to a Roth IRA.
Third, even when the features are available, they may be difficult to find. The details may be buried in plan documents or spread across separate sections of a benefits website. The payroll election, conversion process and remaining contribution room may not be obvious.
Finally, the strategy requires monitoring. Employer contributions can reduce the remaining room, contributions can arrive throughout the year and plan testing can limit highly compensated employees. This is not something to implement solely from a generic online explanation.
What might I have done differently?
During my J&J years, I eventually saved enough to invest meaningful amounts outside my 401(k). Much of that additional money went into a taxable brokerage account.
There was nothing inherently wrong with that. The brokerage account gave me flexibility, broad investment access and money that was not tied to retirement-plan withdrawal rules.
But some of that money was intended for retirement and did not need to remain accessible. If I had understood the mega backdoor Roth, I could have evaluated whether moving a portion into Roth savings made sense.
That may have allowed more of my long-term investments to grow inside a Roth account, where qualified distributions generally are not subject to federal income tax when the applicable requirements are met, rather than in a brokerage account where dividends, interest and realized gains may create current or future tax consequences.
I cannot know with certainty what I would have chosen each year. Tax rates, family goals, cash needs and plan provisions changed over time. My lesson is not that the brokerage account was a mistake. It is that I was making the decision without understanding all of the available choices.
A note about accessing the money
You may hear that Roth contributions can always be accessed before age 59½. That statement needs context.
If the money remains in a Roth 401(k), the employer plan can restrict distributions while the participant is still employed. A nonqualified Roth 401(k) distribution can also include both contributions and earnings under the applicable allocation rules.
If the money is later rolled into a Roth IRA, Roth IRA ordering rules generally treat regular contributions as coming out first, followed by conversion and rollover amounts, and then earnings. Conversion and rollover amounts can have separate five-year considerations. [4]
The practical lesson is not that all of the money will automatically be available whenever you want it. It is that after-tax amounts may eventually provide additional flexibility, but the plan, rollover, tax and withdrawal rules should be reviewed before relying on that flexibility.
Now I need to evaluate the opportunity again
Now that I am self-employed, I am looking at this strategy from a different perspective.
A Solo 401(k) can potentially support a mega backdoor Roth, but only if the plan document allows voluntary after-tax employee contributions and provides a path to an in-plan Roth conversion or an in-service rollover. Many basic off-the-shelf Solo 401(k) plans do not include all of those features.
So I cannot simply ask whether a provider offers a Roth Solo 401(k). I need to ask whether the plan supports each step of the actual strategy and who will handle the administration and tax reporting.
The same lesson applies to employees at other companies: do not assume your plan offers the strategy, and do not assume that it does not. Ask for the plan document or summary plan description and confirm the process with the administrator.
Another tool, not a universal recommendation
A mega backdoor Roth is not appropriate for everyone.
Someone may be better served by building an emergency fund, paying down high-interest debt, saving for a near-term goal or maintaining money in a brokerage account. A household in a high current tax bracket may also need to compare additional Roth savings with other pre-tax opportunities.
Plan fees, investment choices, access rules, tax reporting and future expectations also matter.
But for people who are already maximizing their regular workplace retirement contributions and continuing to save substantial amounts, it is a tool worth understanding.
The biggest lesson for me is not that I should automatically have used the strategy.
It is that I spent years with a potentially useful option inside my retirement plan without understanding what it could do.
Sometimes better financial planning does not begin with finding a new investment. It begins with understanding the tools you already have.
Sources
1. Internal Revenue Service, 2026 retirement-plan and IRA contribution limits: https://www.irs.gov/retirement-plans/cola-increases-for-dollar-limitations-on-benefits-and-contributions
2. Internal Revenue Service, Designated Roth accounts and in-plan Roth rollovers: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-designated-roth-account
3. Internal Revenue Service, Rollovers of after-tax contributions in retirement plans: https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans
4. Internal Revenue Service, Publication 590-B, Roth IRA distribution ordering rules: https://www.irs.gov/publications/p590b
Disclosure
Investment advisory services offered through Fiduciary Financial Advisors a registered investment adviser. The views expressed represent the opinion of Fiduciary Financial Advisors. Information does not constitute investment, tax, or legal advice.
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