Amazon's Mega Backdoor Roth: Save More for Retirement
Amazon’s mega backdoor Roth is one of the company’s most powerful retirement benefits — and one of its most underutilized. Using this strategy, you can contribute beyond the standard limits of a 401(k) and save more for retirement.
What Is the Mega Backdoor Roth Conversion?
A mega backdoor Roth is a retirement savings strategy that lets you contribute significantly more to a Roth account than the standard limits would normally allow. While a regular Roth IRA has a contribution limit of just $7,000 in 2025 ($8,000 if you're 50 or older), the Mega Backdoor Roth strategy can potentially allow you to put tens of thousands of additional dollars into tax-advantaged accounts.
The strategy takes advantage of after-tax (non-Roth) contributions to your 401(k) plan, which are then converted to Roth status, allowing for tax-free growth and tax-free withdrawals in retirement.
How Amazon's Mega Backdoor Roth Works
Amazon is among a limited number of employers that offer the necessary 401(k) plan features to enable the mega backdoor Roth strategy. The process has two main parts:
After-tax contributions: First, you contribute after-tax dollars (beyond the regular pre-tax/Roth 401(k) limit) to your Amazon 401(k) plan. These are different from both traditional pre-tax and Roth contributions.
Roth conversion: Those after-tax contributions are then converted to Roth status, either within your 401(k) plan or by rolling them over to a Roth IRA.
Benefits of the Mega Backdoor Roth Program
The mega backdoor Roth offers several significant benefits for Amazon employees.
Increased Retirement Savings
The mega backdoor Roth allows you to contribute tens of thousands more to tax-advantaged accounts than standard limits permit. This opens new doors for your retirement savings strategy.
Tax-Free Growth
Once your after-tax contributions are converted to Roth status, all earnings grow completely tax-free. This tax-free growth can compound over time, greatly increasing your nest egg.
Tax-Free Withdrawals
All qualified withdrawals from your Roth accounts in retirement are 100% tax-free. This creates predictable retirement income without worrying about how future tax rates might affect your withdrawal strategy, providing greater control over your retirement income.
Tax Diversification
The mega backdoor Roth helps you balance pre-tax and post-tax investments. This tax diversification gives you flexibility during retirement to strategically withdraw from different account types, potentially lowering your overall tax burden.
Estate Planning Advantages
Roth accounts can be extremely efficient wealth transfer vehicles. Unlike traditional retirement accounts, Roth accounts don't have required minimum distributions (RMDs) during your lifetime, allowing for maximum tax-free growth. Your beneficiaries will also receive tax-free distributions.
No Income Restrictions
Unlike direct Roth IRA contributions, which phase out at higher income levels, the mega backdoor Roth strategy has no income limitations. This makes it particularly valuable for high-earning Amazon employees who would otherwise be restricted from contributing to Roth accounts through conventional means.
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How Much Can You Contribute to the Mega Backdoor Roth?
In 2025, you can contribute up to $23,500 in pre-tax or Roth funds to your Amazon 401(k). (For employees aged 50 or older, this increases to $31,000 through catch-up contributions.) Amazon matches these contributions at a rate of 50%, up to 4% of your total income.
However, the true limit of your 401(k) is $70,000, including your pre-tax and Roth 401(k) contributions, the Amazon employer match, and additional after-tax contributions (which can then be converted through the mega backdoor Roth program).
This means that your maximum mega Backdoor portion is calculated as:
Total 401(k) limit - pre-tax and Roth 401(k) contributions - employer match = maximum mega backdoor Roth contributions.
For example, let’s say you’re 51. This year, you contribute the maximum 401(k) investment for your age group ($31,000 with catch-up contributions). Because of your annual salary, you receive $7,000 in Amazon matching contributions, for a combined total of $38,000. This leaves $32,000 in potential after-tax contributions before reaching the $70,000 limit. That $32,000 is your mega backdoor Roth contribution limit.
Who Should Use Amazon's Mega Backdoor Roth?
The mega backdoor Roth strategy is particularly beneficial for:
High-income earners who are already maxing out their regular 401(k) and IRA contributions
Employees who expect to be in a high tax bracket in retirement
Employees with additional cash flow available for retirement savings
Long-term Amazon employees looking to build substantial tax-free retirement income
Employees who value tax diversification in their retirement accounts
If you fit one or more of these categories, the mega backdoor Roth could be a game-changer for your retirement strategy.
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Step-by-Step Guide to Setting Up Amazon's Mega Backdoor Roth
Prerequisites
Before setting up the mega backdoor Roth, ensure:
You're an eligible Amazon employee
You've already set up your regular 401(k) contributions
You have additional cash flow to contribute beyond the standard limits
Step 1: Set Up Regular 401(k) Contributions First
Before implementing the mega backdoor Roth strategy, establish your regular pre-tax or Roth 401(k) contributions. It's typically advisable to contribute at least enough to receive Amazon's full match (4% of your salary).
Step 2: Configure After-Tax Contributions
Log in to Fidelity NetBenefits (netbenefits.com)
Navigate to the "Contributions" section
Locate the "After-Tax Contributions" option
Set your desired after-tax contribution percentage
Step 3: Set Up Automatic Roth Conversion
This critical step ensures your after-tax contributions are automatically converted to Roth status. You may have to contact Fidelity's workplace planning team to do this, but some Amazon 401(k) plans allow you to set this up directly within NetBenefits. Look for an option to automatically convert after-tax contributions to Roth.
Step 4: Verify Your Setup
After your next paycheck is processed:
Log back in to Fidelity NetBenefits
View your account balances
Confirm you see "Roth In-Plan Conversion" listed in your sources
Verify that your after-tax contributions are being properly converted
Strategies to Maximize Your Amazon Mega Backdoor Roth
Start Early in the Year
Beginning your after-tax contributions early in the calendar year allows you to spread the contributions across more pay periods, making it easier to reach maximum contribution levels.
Coordinate with RSU Vesting
Plan your cash flow around RSU vesting events. Consider selling vested RSUs to fund increased 401(k) contributions while maintaining your lifestyle.
Adjust After Major Life Events
Reassess your contribution strategy after salary increases, bonuses, or major life changes to ensure you're optimizing your retirement savings.
Balance Tax Diversification
Use the mega backdoor Roth as part of a broader tax diversification strategy, balancing pre-tax, Roth, and taxable accounts based on your retirement timeline and expected future tax rates.
How TrueWealth Financial Partners Can Help
Implementing the mega backdoor Roth strategy requires careful planning and coordination with your overall financial strategy. At TrueWealth Financial Partners, we specialize in helping Amazon employees optimize their retirement benefits. Our team can:
Review your finances to determine if the mega backdoor Roth is right for you
Help calculate your maximum contribution amounts based on your specific salary and circumstances
Guide you through the setup process with Fidelity
Integrate your mega backdoor Roth strategy with your overall retirement and tax planning
Provide ongoing support as your financial situation evolves
As fiduciary financial advisors, the TrueWealth team is committed to providing objective advice that's in your best interest.
Ready to explore whether the mega backdoor Roth is right for you? Schedule a free consultation today, and we’ll be happy to help make your golden years truly golden.
FAQs
Does Amazon match after-tax contributions?
No, Amazon only matches up to 4% of your salary on regular pre-tax or Roth 401(k) contributions, providing a 50% match (effectively 2% of your salary). After-tax contributions do not receive matching contributions.
Can I contribute to both a mega backdoor Roth and a regular Roth IRA?
Yes, you can use both strategies simultaneously. The standard Backdoor Roth IRA would allow you to contribute an additional $7,000 ($8,000 if 50+) in 2025, on top of your Mega Backdoor Roth contributions.
What happens to my mega backdoor Roth funds if I leave Amazon?
If you leave Amazon, your after-tax contributions that have already been converted to Roth status will remain in your Roth 401(k) or Roth IRA. You can roll these funds over to another qualified retirement account when changing employers.
How does the Mega Backdoor Roth affect my taxes?
The mega backdoor Roth doesn't provide an immediate tax deduction like traditional 401(k) contributions. However, it allows for tax-free growth and tax-free withdrawals in retirement, which can be extremely valuable for long-term wealth building.
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