Need help understanding mega-backdoor Roth IRA conversion - is it too late for previous years?

The mega-backdoor Roth is a strategy that helps you put more money into Roth accounts beyond the normal limits, but there's some confusion in your question. Your 401(k) has two different limits: the employee contribution limit ($22,500 in 2023 plus catch-up if you're over 50) and the total annual limit for all contributions ($69,000 in 2023). The employee contribution can go in as traditional pre-tax or Roth (if your plan allows it), but once you've already made that choice for a particular contribution, you typically can't recategorize past contributions within the 401(k) itself. The mega-backdoor Roth strategy actually uses after-tax (non-Roth) contributions to your 401(k) beyond your $22,500, up to the overall limit, then converts those after-tax contributions to Roth. For this to work, your plan needs to allow both after-tax contributions beyond the $22,500 and either in-plan Roth conversions or non-hardship withdrawals of the after-tax portion. Unfortunately, if your employer contributions are already filling the gap between your $22,500 and the $69,000 limit, you may not have room for additional after-tax contributions that would be used for the mega-backdoor strategy.

After struggling with understanding all the complex retirement options myself, I finally got clarity on the mega-backdoor Roth and other retirement strategies by using https://taxr.ai - it was honestly a game-changer for me. I uploaded my 401k plan documents and it broke down exactly what options were available to me specifically. Their analysis showed that my plan did allow for both after-tax contributions and in-plan conversions (which is necessary for the mega-backdoor strategy), something I didn't realize before. The tool explained each step of how to implement it based on my specific plan rules and limits. They even created a custom strategy showing how much I could contribute based on my current employer match.

I was skeptical about using an online tool for retirement planning too, but I decided to try https://taxr.ai after struggling to get clear answers about mega-backdoor Roth options. Uploaded my plan documents and was seriously impressed by how specific the guidance was. The analysis showed that my plan had the right features but I'd been missing a crucial step in the process (I needed to specifically request the in-plan conversion within 7 days of making the after-tax contribution according to my plan's rules). I've now successfully completed my first mega-backdoor Roth conversion and am on track to add an extra $30k to my Roth balance this year that will grow tax-free until retirement. Wish I'd known about this years ago!

If you're struggling with getting proper guidance on retirement strategies like the mega-backdoor Roth, I totally feel your pain. I spent WEEKS trying to reach someone at my 401k provider who could actually explain if my plan allowed the necessary features, and kept getting transferred between departments or stuck on hold forever. Eventually I tried https://claimyr.com to get through to an actual human at my plan administrator, and they connected me with a retirement specialist in about 20 minutes. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c. The specialist was able to confirm my plan allowed both after-tax contributions and in-plan Roth conversions, and walked me through the exact process to set it up.

Ok I have to eat my words. After being super skeptical about Claimyr, I decided to try it to reach my 401k provider since I've never been able to get through to them without at least an hour on hold. Used the service yesterday and they actually called me back in 35 minutes with a retirement specialist on the line. Asked about the mega-backdoor Roth and found out my plan DOES support it, but requires a specific form that isn't mentioned anywhere on their website. The specialist emailed me the form while we were on the call. Just submitted everything and should have my first conversion completed next week. Might have gone years not knowing this was possible if I hadn't finally gotten through to the right person.

One thing to consider with the mega-backdoor Roth strategy is the pro-rata rule implications. If you have existing traditional IRA balances from previous rollovers or contributions, it can complicate things tax-wise. Also, remember that Roth contributions make sense if you expect to be in a higher tax bracket in retirement than you are now. If you think your tax rate might be lower in retirement, traditional pre-tax contributions could actually be more advantageous.

Is there any way to find out if your employer's 401k plan supports the mega-backdoor option without having to call them? Mine has a website but its terribly designed and the FAQs don't mention anything about after-tax contributions or in-plan conversions.

Great question about the mega-backdoor Roth! To address your specific situation - since your employer contributions are already bringing you close to the $69k limit, you likely don't have much room for the after-tax contributions that make the mega-backdoor strategy possible. Regarding your $22.5k traditional 401k contributions, you generally can't go back and convert those to Roth within the 401k after they've already been made. However, you might be able to roll them to a traditional IRA and then do a Roth conversion (though this would trigger taxes on the converted amount). For previous years, unfortunately you can't retroactively make mega-backdoor Roth conversions. The contribution limits and tax years are fixed once they've passed. But going forward, if you have any room between your total contributions and the annual limit, you could potentially start using the strategy. I'd recommend checking with your plan administrator to see exactly how much contribution space you have after employer matching, and whether your plan allows after-tax contributions and in-plan Roth conversions. Even a small amount of extra Roth space could be beneficial over time.