Understanding Your Amazon Retirement Benefits [2025]
As an Amazon employee, you have access to a variety of retirement benefits. In this guide, we’ll cover everything you need to know about your Amazon retirement plan so you can grow your wealth and save more for the future.
Amazon Retirement Benefits Overview
Amazon offers several key retirement benefits to help employees save for their future:
The Amazon 401(k) Plan
Mega Backdoor Roth Conversion
Restricted Stock Units (RSUs)
Health Savings Account (HSA)
Flexible Spending Accounts (FSAs)
Let's explore each of these benefits in detail.
1. Amazon 401(k) Plan
The Amazon 401(k) is a tax-advantaged retirement savings plan administered by Fidelity Investments. To use this 401(k), you will contribute a percentage of your salary through automatic payroll deductions. These contributions will be invested in your choice of stocks, bonds, or other investment vehicles, where they can grow over time.
Eligibility & Enrollment
All Amazon employees age 18 or older are eligible for the 401(k) plan 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 sooner.
Contribution Options
Amazon's 401(k) plan allows two main types of contributions: traditional (pre-tax) and Roth (after-tax).
Pre-tax contributions are taken from your income before taxes are applied. This reduces your current taxable income. Then, when you make withdrawals in retirement, your distributions will be taxed as ordinary income.
Roth contributions are made with after-tax dollars. Because these funds are taxed before being invested in your 401(k), they will grow tax-free and can be withdrawn tax-free in retirement.
Contribution Limits for 2025
The IRS limits how much you can contribute to a 401(k) annually. This limit changes from year to year to account for inflation.
In 2025, employees under 50 can contribute up to $23,500 to the Amazon 401(k).
Employees aged 50 or older can contribute up to $31,000.
Employer Match
Amazon will match 50% of your contributions up to a maximum of 4% of your base salary. This can potentially mean thousands of dollars in additional retirement funds at no extra cost to you. For example, if an employee with a $150,000 annual salary contributes at least 4% ($6,000) to their 401(k), Amazon will add another $3,000 to their 401(k).
Vesting Schedule
Your personal 401(k) contributions are immediately vested. This means you have complete control over all funds you contribute to your account.
However, Amazon’s matching 401(k) contributions will only vest after you are credited with three years of work. (A year is defined as a calendar year in which you complete 1,000 hours of service.) If you leave Amazon before completing three years of service, you forfeit all employer matching contributions.
Investment Options
Amazon's 401(k) plan offers a variety of investment options through Fidelity, including:
Target-date funds
Index funds
Actively managed mutual funds
Amazon company stock.
Making Withdrawals
You can begin taking penalty-free distributions from your Amazon 401(k) once you reach age 59½, regardless of whether you're still working at Amazon. (Though you'll still need to pay income taxes on any distributions from pre-tax contributions.) If you retire 55 or later, you can make penalty-free withdrawals per the rule of 55. This helps facilitate early retirement for Amazon employees.
Required Minimum Distributions (RMDs)
For pre-tax funds, you must begin taking RMDs by April 1 of the year after you reach age 73 (70½ if you reached that age before January 1, 2020), or the year after you retire, whichever is later. These RMDs do not apply to Roth 401(k) funds.
Leaving Amazon
When you leave Amazon, you have several options for your 401(k):
Keep it in the Amazon 401(k) plan (if your balance exceeds $5,000)
Roll it over to an IRA (which may provide more investment options)
Roll it over to a new employer's 401(k) plan
Take a distribution (subject to taxes and potentially penalties depending on your age)
Tips to Maximize Your Amazon 401(k)
Get the Full Match
Always contribute at least 4% of your salary to receive Amazon's full employer match. This is essentially free money for your retirement fund.
Choose Tax Treatment Strategically
Evaluate whether pre-tax or Roth contributions make more sense based on your current and expected future tax brackets. If you expect to be in a lower tax bracket during retirement, pre-tax makes sense. If you expect your tax bracket to be higher, then Roth contributions may be wiser. Many employees get the best results by using a combination of both options.
Consider the Three-Year Vesting Period
If you're approaching the three-year mark at Amazon, consider the financial implications of leaving before your employer contributions vest. Depending on your salary and contribution history, this could represent thousands of dollars in retirement savings.
Automate Your Increases
Set calendar reminders to review and potentially increase your contribution percentage after receiving raises or bonuses. This prevents lifestyle inflation while building your retirement nest egg.
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2. Mega Backdoor Roth Conversion
One of Amazon's most valuable (but often overlooked) retirement benefits is the mega backdoor Roth conversion. Using this program, you can contribute after-tax dollars to your 401(k) beyond the standard contribution limits. Then, these after-tax contributions can be converted to Roth status.
Maximum Contribution Amount
In 2025, the IRS has a total 401(k) contribution limit of $70,000 ($77,500 for employees age 50 or older). This includes your pre-tax and Roth 401(k) contributions, the Amazon employer match, and any additional after-tax contributions you make.
For example, if you’re under 50, and you contribute the maximum $23,500 in regular contributions, and receive a $5,000 Amazon match, this would leave $41,500 before reaching the $70,000 total limit. You can contribute up to that amount in after-tax dollars, which are then converted to a Roth IRA through the mega backdoor Roth program.
Benefits of the Mega Backdoor Roth
The mega backdoor Roth offers several powerful advantages that make it one of the most valuable retirement planning tools available to Amazon employees:
Higher Contribution Limits: While a standard Roth IRA has a contribution limit of $7,000 in 2025 ($8,000 if you're 50+), the Mega Backdoor Roth strategy allows you to potentially contribute tens of thousands more to a Roth account.
No Income Limitations: Unlike direct Roth IRA contributions, which phase out for high earners, the mega backdoor Roth has no income restrictions, making it especially valuable for well-compensated employees.
Tax-Free Growth and Withdrawals: All earnings on your contributions grow completely tax-free, and qualified withdrawals in retirement are also tax-free, potentially saving you significant amounts in taxes over the long term.
Tax Diversification: Having a mix of pre-tax and Roth assets gives you more flexibility when withdrawing funds in retirement, allowing you to strategically manage your tax liability each year.
Estate Planning Benefits: Roth IRAs can be efficient wealth transfer vehicles, as beneficiaries can receive tax-free distributions (though they are subject to their own distribution rules).
Tips to Maximize the Mega Backdoor Roth Program
Use the Mega Backdoor Roth Option
If you have additional funds to save for retirement beyond the standard 401(k) limits, take advantage of Amazon's mega backdoor Roth provision. This strategy can greatly increase your retirement savings.
Set Up Automatic Conversions
To minimize taxable earnings, convert after-tax contributions frequently, ideally after every paycheck or on a monthly schedule. If using Amazon's in-plan Roth feature, set up automatic conversions through Fidelity NetBenefits.
Coordinate with Other Retirement Accounts
If you're also contributing to a traditional IRA, be aware of potential pro-rata rule complications. The pro-rata rule requires you to consider all your IRA accounts as a single entity when calculating tax liability for conversions.
Prioritize Over Taxable Accounts
The mega-backdoor Roth is generally better than a taxable brokerage account if you're saving for long-term retirement goals rather than short-term needs like buying a home, as it provides tax-free growth with no annual tax drag from dividends and capital gains.
3. Restricted Stock Units (RSUs)
Along with a salary, Amazon’s compensation package generally includes RSUs. These stocks vest over time, at which point you can sell them for an immediate profit or hold them for long-term gains. Either way, these shares can be an excellent tool in your retirement planning strategy.
Vesting Schedule
Stock vests will begin on your first anniversary according to this schedule:
Year 1: 5% of your total RSU grant vests
Year 2: 15% of your total RSU grant vests
Years 3 and 4: 40% of your total RSU grant vests in 2 installments (20% every 6 months)
Many employees also receive additional RSU grants throughout their tenure at Amazon.
RSUs and Retirement Planning
RSUs can complement your retirement strategy in several ways.
First, they provide liquidity for additional retirement contributions. By selling vested RSUs, you can free up more cash to maximize contributions to your 401(k) and other tax-advantaged accounts.
You can also hold onto a portion of your vested RSUs for potential long-term appreciation. This can lead to more gains over time, as well as lower capital gains tax rates. (If not held for at least a year, RSUs are taxed as ordinary income.)
Tips to Maximize Your Amazon RSUs
Develop a Consistent Selling Strategy
Consider selling your RSUs as soon as they vest and redirecting the proceeds toward diversified investments, home savings, college funds, or increasing contributions to your 401(k). This reduces your concentration risk in a single company.
Plan for the Vesting Schedule
Amazon's unique vesting schedule means 80% of your RSUs vest in years 3 and 4. Build this into your financial planning to avoid surprises, particularly for tax planning.
Manage Your Tax Withholding
Amazon typically withholds only about 22% of your shares for taxes at vesting. For high earners, this may not be sufficient, potentially creating a significant tax bill at the end of the year.
Use RSUs to Diversify
If you have appreciated RSUs but aren't maxing out your tax-advantaged accounts (401(k), HSA), consider selling some positions to fund these contributions, which can help offset the tax impact while diversifying your portfolio.
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4. Health Savings Account (HSA)
Amazon employees enrolled in a high-deductible health plan can contribute to an HSA, where the funds grow tax-free. Withdrawals will also be tax-free if taken to pay for qualified medical expenses. Best of all, the contributions themselves are also tax-deductible. This means your HSA has three powerful tax advantages:
Tax-deductible contributions
Tax-free growth
Tax-free withdrawals for qualified medical expenses
The money in your HSA is always yours to keep, even if you leave Amazon. After age 65, you can withdraw HSA funds for non-medical expenses without penalty, too (though you'll pay ordinary income tax, similar to a traditional 401(k)).
Employer Contributions
Amazon contributes to employee HSA accounts as well, reducing the amount you need to contribute personally to reach the maximum. For 2025, Amazon contributes the following amounts:
$500 to an employee-only HSA
$1,000 to an HSA for an employee with a spouse/domestic partner or children
$1,500 to HSA for an employee with a spouse/domestic partner and children (full-family coverage)
Contribution Limits for 2025
The HSA contribution limits for 2025 are $4,300 for self-only coverage and $8,550 for family coverage. Those 55 and older can contribute an additional $1,000 as a catch-up contribution. (The annual limit includes the employer contribution.)
Tips to Maximize Your Amazon HSA
Max Out Your Contributions
If you're enrolled in a high-deductible health plan, maximize your HSA contributions. This can be a game-changer for dealing with healthcare expenses in the long run.
Treat It as a Retirement Account
Consider building your HSA as a long-term investment rather than a spending account. Only draw on it for large or unusual medical expenses, not routine ones, to maximize the triple tax advantage.
Invest Your HSA Funds
Unlike many HSA holders who keep their savings in cash, consider investing your HSA balance in growth-oriented investments for long-term healthcare needs in retirement. That way, you can take full advantage of your HSA’s potential for tax-free growth.
Save Receipts for Future Reimbursement
Consider paying for current medical expenses out of pocket while keeping detailed records and receipts. This allows your HSA investments to grow tax-free, and you can reimburse yourself for these expenses anytime in the future without penalty.
Coordinate with Your Spouse (If Applicable)
If your spouse also has an HSA, carefully coordinate your contributions. If you and your spouse are both age 55 or over and eligible, you each can make $1,000 HSA catch-up contributions, but must do so in separate HSAs.
5. Flexible Spending Accounts (FSAs)
FSAs are tax-advantaged accounts you can use to set aside pre-tax dollars for specific expenses. Amazon offers two types of FSAs:
A Health Care FSA for eligible medical, dental, and vision expenses
A Dependent Care FSA for eligible child care or elder care expenses
Enrollment and Contributions
To enroll in an FSA, you must sign up during the open enrollment period and elect how much you'd like to set aside pre-tax for the year. The total amount is then broken up and deducted evenly from each paycheck throughout the year.
Unlike a 401(k), the full annual amount you elect for a Health Care FSA is available for use immediately at the beginning of the plan year, even though the contributions are spread across your paychecks. However, for Dependent Care FSAs, funds become available only as they are contributed.
Contribution Limits for 2025
The Health Care FSA has a minimum contribution of $120 and a maximum of $3,050 per plan year to use for eligible health care expenses.
The Dependent Care FSA can cover the costs of childcare or elder care with a minimum of $100 and a maximum of $5,000 annually.
Tax Advantages
FSAs provide significant tax benefits by allowing you to pay for eligible expenses with pre-tax dollars. This lowers your taxable income, which reduces your federal income and Social Security taxes. For many Amazon employees, this can result in tax savings of 25–40% on qualified expenses.
Using Your FSA Funds
You can access your FSA funds in two primary ways:
FSA Debit Card: Amazon provides an FSA debit card that can be used at qualified merchants for eligible expenses
Reimbursement: Pay for eligible expenses out of pocket, and then submit claims for reimbursement with receipts or proof of payment.
The "Use It or Lose It" Rule
One of the most important aspects of FSAs is the "use it or lose it" rule. Many FSA plans require you to spend all funds by December 31, although some plans offer grace periods or allow a small amount to carry over to the next year.
For 2025, a maximum of $660 of unused Health Care FSA funds can be carried over to the next plan year. However, Dependent Care FSAs typically do not allow carryover.
Eligible Expenses
Health Care FSAs can be used for a wide variety of expenses:
Medical, dental, and vision copays and deductibles
Prescription medications
Over-the-counter medications
Medical equipment and supplies
Vision care items like glasses and contact lenses
Dental treatments not covered by insurance
Dependent Care FSAs cover expenses related to caring for eligible dependents:
Daycare or preschool for children under 13
Before and after-school care
Summer day camps
Elder care for tax dependents
Tips for Maximizing Your Amazon FSAs
Plan Your Contributions Carefully
Since FSAs operate under "use it or lose it" rules, plan ahead at enrollment time. Don't put more money in your FSA than you reasonably expect to spend within the plan year.
Know Your Deadlines
Amazon's FSA deadlines are March 31st for the Dependent Care FSA and May 31st for the Healthcare FSA following the contribution year, with claims submission permitted until June 30th. Mark these dates on your calendar to avoid forfeiting funds.
Understand Carryover Options
For 2025, Amazon allows you to carry over up to $660 of unused Healthcare FSA funds to the next plan year, but this doesn't apply to Dependent Care FSAs. Factor this in when planning your contributions.
Re-enroll Each Year
If you have a 2024 FSA and want one for 2025, you must actively enroll during Open Enrollment — these accounts do not automatically roll over year-to-year.
Use Your Amazon Retirement Benefits to Retire with More
Amazon offers a robust suite of retirement benefits that, when used properly, can help you build significant wealth for your future. By:
Taking full advantage of the Amazon 401(k)
Exploring the mega backdoor Roth option
Strategically managing your RSUs
Investing in tax-advantaged accounts like HSAs
…you can create a strong foundation for retirement security.
However, retirement planning is not one-size-fits-all. Your optimal strategy will depend on your specific financial situation, goals, and timeline. Working with a fiduciary financial advisor who understands the nuances of Amazon's retirement benefits can help you make the most of the opportunities available.
How TrueWealth Financial Partners Can Help
Navigating Amazon's retirement benefits can be complex, especially when trying to optimize them as part of a comprehensive financial plan. At TrueWealth Financial Partners, we specialize in helping Amazon employees make the most of their benefits package. Our services include:
Personalized Retirement Planning: We help you determine the optimal contribution strategy across all your retirement accounts.
RSU Management: We can help you develop a plan for your RSUs that balances diversification with growth potential.
Tax Optimization: We identify strategies to minimize your tax burden both now and in retirement.
Comprehensive Financial Planning: We integrate your retirement planning with other financial goals like home purchases, education funding, and estate planning.
Investment Management: We help you select appropriate investments within your retirement accounts based on your goals and risk tolerance.
Ready to optimize your Amazon retirement benefits? Schedule a free consultation with one of our fiduciary financial advisors, and we can help you take the next step toward a better retirement.
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