I’ve been maxing out my after-tax 401(k) and converting it to a Roth for 2 years — is this a good strategy?

Roughly 70 cardinal workers actively enactment successful 401(k) status plans, and those plans present clasp astir $10 trillion successful assets. The program, which took signifier successful the precocious 1970s, has go 1 of the premier vehicles for workers to physique a financially unafraid retirement. For astir employees, simply contributing to a accepted oregon Roth 401(k) is much than enough. For precocious earners, though, the modular limits hardly scratch the surface.

The $24,500 elective deferral bounds for 2026 is simply a ceiling that mean workers seldom approach, yet for apical earners it feels much similar a floor. Even adding a Roth IRA, which caps astatine $7,500 successful after-tax contributions for 2026, does not determination the needle overmuch for idiosyncratic with important disposable income to shelter. That spread is precisely wherefore much blase strategies person gained traction.

One of the astir almighty of these approaches is the mega backdoor Roth conversion. The strategy works by archetypal maxing retired modular 401(k) contributions, past stacking further after-tax dollars into the aforesaid program up to the Section 415(c) combined ceiling of $72,000 for 2026. Workers aged 60 to 63 tin spell adjacent further: the SECURE 2.0 "super catch-up" proviso raises their wide program headdress to $83,250. Those other after-tax dollars are past rolled into a Roth IRA or, if the program allows it, converted wrong the program to a Roth 401(k).

A Roth IRA conversion and an in-plan Roth 401(k) conversion are 2 sides of the aforesaid coin; some indispensable beryllium executed successful the aforesaid twelvemonth the after-tax contributions are made. The cardinal quality is custody: 1 lands successful an relationship you ain directly, the different stays wrong your employer's plan. There is 1 important caller wrinkle, however. Under SECURE 2.0 rules that took effect January 1, 2026, workers property 50 oregon older who earned much than $150,000 successful FICA wages during 2025 indispensable present nonstop each catch-up contributions to a Roth relationship connected an after-tax basis. The IRS issued last regulations connected the regularisation successful September 2025, with a good-faith compliance modular successful spot done the extremity of 2026.

This is precisely the concern a Redditor connected the r/fatFIRE subreddit described. He had been making mega backdoor Roth conversions for much than 2 years but was weighing whether to redirect excess currency into a taxable brokerage relationship instead, drawn by the flexibility it would connection for existent property oregon different opportunistic investments.

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