Amazon Retirement Benefits: Frequently Asked Questions
At TrueWealth Financial Partners, we’ve fielded plenty of questions about Amazon retirement benefits. This comprehensive FAQ addresses the most common questions we encounter, helping you fully understand your Amazon benefits.
Amazon 401(k)
When am I eligible to participate in Amazon's 401(k) plan?
All Amazon employees age 18 or older are eligible to join the Amazon 401(k) immediately upon their date of hire. All full-time and reduced-time workers are automatically enrolled 90 days after their hire date unless they opt out or enroll themselves before then.
How much does Amazon match in my 401(k)?
Amazon matches 50% of your contributions up to 4% of your eligible pay. This effectively provides a 2% match. For example, if you earn $200,000 and contribute 4% ($8,000), Amazon will contribute 2% ($4,000) as a match. (You must contribute at least 4% to receive the full employer match.)
How much can I contribute to my Amazon 401(k) in 2025?
For 2025, you can contribute up to $23,500 annually in either pre-tax or Roth contributions. If you're 50 or older, you can make an additional $7,500 catch-up contribution for a total of $31,000.
How does vesting work for the Amazon 401(k)?
Your own contributions are immediately vested, giving you full control over your funds. However, matching contributions are only vested after you are credited with three years of vesting service. A year of vesting service is defined as a calendar year in which you complete 1,000 hours of service. If you leave Amazon before meeting this schedule, you will forfeit any unvested employer matching funds.
What investment options are available in Amazon's 401(k)?
Amazon's 401(k) plan has more than 25 different investment options to select from. The plan includes target date funds, actively managed funds, index funds, and a BrokerageLink option that provides access to hundreds of additional investment choices.
Mega Backdoor Roth
What is the Amazon mega backdoor Roth, and how does it work?
The mega backdoor Roth is a provision within the Amazon 401(k) that allows you to contribute additional after-tax dollars and convert those dollars to Roth. This strategy allows high-income earners to save significantly more for retirement in tax-advantaged accounts beyond standard contribution limits.
What are the tax benefits of the mega backdoor Roth?
The mega backdoor Roth provides tax-free growth and tax-free distributions in retirement. While you don't get a tax deduction for the initial after-tax contributions, all future growth and qualified withdrawals are completely untaxed, making it a powerful wealth-building tool for high earners.
How much can I contribute through the mega backdoor Roth?
The exact amount depends on your salary and how much you've already contributed in pre-tax/Roth contributions, plus employer match. For employees under 50, the mega backdoor Roth allows you to contribute up to an additional $39,100 in after-tax funds.
Am I eligible for Amazon's mega backdoor Roth?
All Amazon employees can use the mega backdoor Roth program. There are no income restrictions for this strategy, making it particularly valuable for high earners who are ineligible for traditional Roth IRA contributions.
How do I set up automatic mega backdoor Roth conversions?
You can set up automatic mega backdoor Roth conversions through Fidelity NetBenefits.
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Amazon RSUs
How does Amazon's RSU vesting schedule work?
Amazon's on-hire RSU vesting schedule works as follows:
5% of the initial grant will vest at the end of your first year.
15% of the grant will vest at the end of your second year.
40% of the grant will vest at the end of your third year.
40% of the grant will vest at the end of your fourth year.
This backloaded structure is unique among tech companies.
When do Amazon RSUs vest during the year?
Stock vests will begin on your first anniversary. You will receive additional stock vests at the end of year two and then every six months until you've been with the company for four years. After your initial grant, refresher RSUs typically vest in May and November each year.
What happens to my unvested RSUs if I leave Amazon?
If an employee leaves Amazon before RSUs vest, they forfeit the unvested shares. This makes timing your departure important, especially if you have significant unvested equity scheduled to vest soon. Many employees time their departure just after major vesting dates to maximize their compensation.
How are Amazon RSUs taxed?
RSU vests are considered supplemental wages and are typically withheld at 22% to cover your taxes. However, this may not be enough to cover your actual tax liability, in which case it is wise to opt for a higher withholding rate. The full value of vested RSUs is treated as ordinary income.
Should I sell my Amazon RSUs immediately when they vest?
In many instances, we recommend that Amazon employees sell and diversify their RSUs upon vesting. This reduces concentration risk and provides cash for other financial goals.
What is Amazon's 2025 RSU pilot program?
Under this program, you can receive 25% of your vesting RSUs as cash and your remaining 75% as RSUs. This cash is paid quarterly beginning in May 2025. If you are L4–L8 and will receive at least 16 RSUs that will vest in 2025, you are eligible for the program.
Do I get additional RSU grants after my initial award?
Amazon employees often get additional RSU grants on an annual basis, most commonly during their annual review and compensation adjustment (Q1 of each year).
Tax and Planning
Why is my tax withholding insufficient on large RSU vests?
Amazon RSUs vest at 5%-15%-40%-40%, not the typical 25-25-25-25 structure that most companies follow. This often catches Amazon employees off guard because of the tax consequences during years three and four. The default 22% withholding is often insufficient for mid to high-level employees, requiring adjustments to your sell-to-cover percentage.
Can I change my RSU tax withholding percentage?
Yes, you can adjust your sell-to-cover percentage through Fidelity NetBenefits, but only during Amazon's open trading windows. (More on this below). Many L5+ employees need 35–45% withholding to avoid large tax bills at year-end, significantly higher than the 22% default.
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Planning for Retirement and Special Situations
How do Amazon's retirement benefits compare to other tech companies?
Amazon's total retirement benefits are competitive but structured differently.
The mega backdoor Roth option is extremely valuable.
The RSU backloading creates unique planning challenges
The 50% 401(k) match is lower than some competitors (but still meaningful when combined with other benefits).
Can I access my Amazon 401(k) early for retirement?
Yes, Amazon's 401(k) plan allows penalty-free withdrawals under the rule of 55, which permits access to your retirement funds without the usual 10% penalty if you leave Amazon in or after the year you turn 55. This creates unique early retirement opportunities compared to the standard age 59½ requirement.
What happens to my benefits during parental leave?
Your base pay, sign-on bonus payments, and RSU vesting will be proportional to the option you select during Amazon's Ramp Back program. A new Amazon RSU vesting schedule will be established upon return to full-time work. Coordinate with HR to understand how leave affects your vesting timeline.
Are there any restrictions on Amazon stock transactions?
Depending on your role, you may be subject to trading windows that restrict when you can buy or sell Amazon stock. These typically open two to three days after earnings announcements and last six to eight weeks. Higher-level employees and those with access to material information are more likely to have trading restrictions.
What if I die before my RSUs vest?
If you pass away before your RSUs are vested, you lose all rights to the unvested RSUs. This makes life insurance planning particularly important for Amazon employees with significant unvested equity compensation. Consider the value of unvested RSUs when determining appropriate life insurance coverage.
When should I consider working with a financial advisor?
Consider professional guidance if you earn over $200,000, have complex financial goals, need help managing the tax implications of RSUs, or want to plan for long-term financial security. Amazon's compensation structure is complex enough that most employees benefit from specialized advice.
What should I look for in a financial advisor?
Choose a fiduciary financial advisor who understands Amazon's specific benefits. Look for experience with RSU planning, mega backdoor Roth strategies, tax optimization, and estate planning for employees with significant equity compensation.
How often should I review my Amazon retirement strategy?
Most Amazon employees benefit from quarterly reviews to adjust strategies as compensation evolves through different career stages and life events. Reviewing your strategy at least annually is the recommended minimum, particularly around performance review time when new equity grants are awarded.
What are the biggest mistakes Amazon employees make with retirement benefits?
Common mistakes include:
Not contributing enough to capture the full 401(k) match
Failing to adjust RSU tax withholding for years three and four
Not diversifying away from Amazon stock concentration
Missing mega backdoor Roth opportunities
Leaving the company at the wrong time relative to your RS vesting schedule
A fiduciary financial advisor can help you avoid these mistakes and any others you might otherwise stray into.
Still Have Questions? TrueWealth Financial Partners Is Standing By!
Amazon's retirement benefits offer tremendous wealth-building potential, but they require careful planning to maximize their value. If you have more questions or want help developing a comprehensive strategy for your Amazon benefits, we’re standing by.
At TrueWealth Financial Partners, we specialize in helping professionals like you grow their wealth for retirement. Schedule a free consultation with one of our fiduciary financial advisors, and we’ll be happy to answer all your questions.
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