Mega Backdoor Roth: How It Works, Rules & 2026 Limits - CCMI Creative Capital Management Investments

What Is a Mega Backdoor Roth and How Does It Work? — With Tips for RTX Employees

If you’re a high-earning professional in California, your income could potentially limit how much you can directly save in a Roth IRA. If you anticipate being in the same or higher tax bracket in the future, a mega backdoor Roth, which is available through certain employer-sponsored retirement plans, could be an effective option to boost tax-free savings and withdrawals in retirement.

As financial advisors in San Diego, we often guide high-net-worth clients with excess cash flow through this complex strategy, considering taxes, contribution limits, and timing risks. Additionally, employers that offer the option, such as Collins Aerospace and other divisions of RTX, may have additional plan aspects to evaluate, such as the new automatic conversion feature. While a powerful strategy, a mega backdoor Roth requires coordination and a deep understanding to execute effectively. Learn more about how it works and if it may be right for you.

Key Takeaways:

A mega backdoor Roth IRA is a strategy that individuals who are no longer eligible to contribute due to higher income levels can use to save beyond the annual pre-tax or Roth 401(k) contribution limits.
The strategy is ideal if your employer plan permits it, you’ve maxed out your pre-tax contributions, and you have excess cash flow not reserved for near-term liquidity, debt repayment, or an emergency fund.
Certain employers, such as RTX, offer the strategy with additional options, such as automatic conversion, so it’s important to understand your plan’s unique features.
Strategic coordination and specialized guidance can help high earners implement this powerful yet complex option while considering taxes, contribution limits, and timing risks.
Additional considerations for executives who are also participating in deferred compensation plans available at RTX.

What is a Mega Backdoor Roth IRA?

A mega backdoor Roth IRA is a strategy individuals can use to save over and above the annual pre-tax or Roth 401(k) contribution limits. It allows employees to put additional savings in a Roth when they are no longer eligible to contribute due to higher income levels. You will pay taxes on any earned growth when you convert after-tax contributions to a Roth IRA; however, once the funds have been converted to a Roth account, you will enjoy tax-free growth afterward. Other benefits include:

Roth account withdrawals are tax-free.
There are no required minimum distributions (RMDs) to take in your 70s, such as those on pre-tax 401(k) contributions, which are fully taxable — but be aware future legislation may affect this option.
The strategy provides a legal workaround for high-income earners who have reached income and contribution limits to save more in a Roth IRA.
For those of you thinking of legacy planning, Roth IRAs are much better to inherit as they are tax-free vs. inheriting tax-deferred assets and having to take taxable withdrawals over 10 years, based on current laws.¹

What Are the Annual Contribution Limits?

In 2026, the annual contribution limit of defined contribution plans like a 401(k), including employee contributions and employer match,² is:

$72,000 for those under 50
$80,000 for those over age 50
$83,250 for those aged 60, 61, 62, and 63

Employees can use a mega backdoor Roth to bridge the gap between the amounts they are currently contributing, plus receiving an employer match, and $72,000, $80,000, or $83,250. See the graphic below.

*2026 IRS Limits

Who Should Use a Mega Backdoor Roth IRA Strategy?

A mega backdoor Roth IRA strategy is an effective savings opportunity if you have excess cash flow, can contribute beyond the standard 401(k) limits, and want to optimize tax-free growth. Consider a mega backdoor Roth if you’re a:

High-Income Earner: Your income exceeds the Roth IRA income limits, making you ineligible for Roth IRA contributions. In 2026, if you earn more than $168,000 as a single filer and $252,000 as a married couple, you are no longer eligible to contribute to a Roth IRA.²
Young Professional: You’re a high-income earner early in your career and want to allow your contributions more time to compound and grow, setting you on a path to a strong retirement.
Near-Retirement Professional: You want to catch up on your retirement savings and boost your retirement income.
Executive: You are also participating in the deferred compensation plan and seeking to maximize employer match.

In addition to the significant savings opportunity a mega backdoor Roth offers, leveraging the strategy helps create a balanced and diversified retirement income plan. We recommend every employee strive for a mix of financial buckets they can draw upon in retirement, including cash, taxable investment accounts, tax-deferred accounts like a 401(k), and tax-free accounts like a Roth, which can be accessed both through an IRA and 401(k).

How Does a Mega Backdoor Roth IRA Work?

A mega backdoor Roth may be available when you reach your annual 401(k) contribution limit and if your employer permits it. The strategy allows you to make after-tax contributions beyond the standard limit noted above.

How to Convert Your After-Tax Contributions

A crucial step, often overlooked, is requesting the conversion, either through an auto-convert feature or manually. Without this step, you may be leaving money on the table or missing an opportunity to save more for retirement. It is important to note you only want to convert “after-tax” balances in your 401(k) and if you make a mistake, it is irreversible and could be costly. Please note you will pay taxes on the growth upon conversion so it’s wise to be well-informed on how this may impact your taxes in a given year. The auto-convert feature allows conversions to automatically happen with every paycheck, minimizing the risk of a larger tax implication upon conversion. However, we suggest you talk to your financial planner or tax advisor before manually converting the after-tax balance or setting up auto-convert as there could be other considerations that are overlooked based on your specific situation.

Mega Backdoor Roth Timing: When Does It Make Sense?

A mega backdoor Roth may make sense if:

Your plan allows an after-tax conversion option.
Your income exceeds the Roth IRA income limits, and you anticipate being in the same or higher tax bracket in the future.
You’re already maximizing your pre-tax or Roth contributions to your 401(k) over and above the employer match.
You have excess cash flow, have paid down high debt, and have already built an emergency fund. You should also consider the impact of a conversion of your liquidity needs for the next several years, for example, if you’re saving for a down payment on a house.

When Should You Execute the Conversion?

Ideally, we recommend implementing the strategy earlier in the year for more flexibility and control. This approach allows you to:

Plan your cash flow and evenly spread contributions throughout the year to make them more manageable.
Track your savings to help ensure you’ve reached your savings target by year-end.
Balance more aggressive retirement savings with other priorities, such as living expenses.
Possibly minimize taxable income when paired with the auto-convert feature, if available in your plan, like it is in the RTX savings plan.

Still, if you have excess cash flow and are on track for a solid retirement, you can initiate a mega backdoor Roth anytime during the year. If you’re uncertain about the timing or the intricacies of completing a mega backdoor Roth, consider consulting with a financial planner to discuss your options and make the most of this opportunity.

How Much Can I Contribute to a Mega Backdoor Roth?

The first step is determining how much in additional contributions you can make, as the limit combines employee contributions and employer matches. Each individual’s contribution amount is dependent on various factors, such as the percentage of salary, which may fluctuate. It doesn’t have to be an all-or-nothing approach and can be tailored to your financial situation.

RTX Employees: Is a Mega Backdoor Roth Right for You?

As of 2026, the option is available for RTX and its affiliated business units, like Collins Aerospace and legacy Raytheon employees. RTX employees can use this significant benefit to boost their retirement savings, especially if they have excess cash and are already maximizing the $24,500 employee contribution amount if under age 50, and the $32,500 to $35,750 range if age 50+.

We regularly advise employees of RTX located here in San Diego, as well as other business units nationwide. With a deep understanding of the RTX 401(k) plan and RTX benefits, we’re here to guide you through the ins and outs of a mega backdoor Roth and implement the strategy in your retirement plan if you wish. In addition to resources on our blog, we dive into special considerations, timelines, and other RTX-specific strategies for your 401(k) and other benefits in our RTX Planning Calendar.

New Automatic Conversion Feature: What You Need to Know

RTX added an automatic conversion feature, making tax-free savings growth more seamless and tax-efficient. The feature, which can be turned on or off, automatically converts all future after-tax contributions to Roth with every paycheck, helping to create consistency and discipline over time. If you don’t use this feature, you can choose to manually convert using the “Convert to Roth” feature in Your Gateway..

Whether done manually or automatically, a portion of the conversion will be taxable. However, the automatic feature may help avoid timing risks and earnings buildup, which is more common with manual conversions, thereby helping further manage tax liability. Additionally, if you have a large after-tax balance in your 401(k), consult with your advisor before turning on this feature, as it can create a large tax liability if converted all at once.

What Are the RTX 401(k) Annual Employee Contribution Limits?

In 2026, RTX employees may contribute as follows:

Employees under 50: $24,500
Employees over 50: $32,500 (includes the $8,000 catchup amount)

Also, RTX offers employees a 4% employer match for maximum contributions (at least 6% of their salary), and most employees receive an additional age-based employer match that ranges from 3% to 7%:

Under age 30 – 3.0%
Age 30 to 34 – 3.5%
Age 35 to 39 – 4.0%
Age 40 to 44 – 4.5%
Age 45 to 49 – 5.0%
Age 50 to 54 – 6.0%
Age 55 and over – 7.0%

The RTX 401(k) retirement plan introduces some complexity when calculating your mega backdoor Roth number, especially for high-income earners or those in a high tax bracket.

We recommend working with a financial advisor who can review your paycheck, bonuses and other compensation, and circumstances to outline a customized contribution amount as it relates to your overall financial situation. A professional can also help you stay updated on new tax laws and legislation affecting contribution and employer match amounts. As mentioned, it is not an all-or-nothing approach and you can slowly start adding more to your 401(k) contributions anytime to determine what feels right for you.

CCMI Understands the RTX Retirement and Benefits Plan

We’re uniquely positioned to help RTX employees, including Collins Aerospace, legacy Raytheon employees, and other professionals, navigate their retirement and benefits. Kim Benson, a former RTX employee, is familiar with the RTX 401(k) and similar plans and thus often advises former colleagues and shares her insights into common 401(k) situations employees may face. She also helps executives coordinate this option with other deferred compensation plans they receive. Additionally, having seen clients through various phases of their lives, she has observed how adopting strategies early on can pay off in the long run.

Everyone’s financial situation is different. If you are not quite at the point of being able to fully maximize your 401(k), you may check out this blog post with other scenarios: RTX (Raytheon Technologies) 401(K): 3 Scenarios Employees Should Consider.

Perhaps you have market concerns, are strained for cash flow, or have other specific needs or priorities. We can help review your situation to develop a custom action plan that addresses your circumstances. Our goal is to use our insights to help you avoid costly mistakes and make informed decisions. Here are some other ways we can help:

Managing and exercising stock options, including RSUs, PSUs, and SARs
Exploring tax-efficient strategies
Reassessing your risk tolerance
Diversification and asset allocation
Integrating your retirement and benefits into your overall financial plan
Identifying the best use of surplus cash flow based on your priorities

We invite you to have a complimentary conversation with our team of financial planning professionals to discuss your 401(k) options from RTX or another employer. Let us assist you in developing a comprehensive plan that considers all aspects of your financial life. Contact our team today to get started.

Sources:

1 Fuscaldo, D. (2026, January 30). Inherited an IRA? Avoid These Expensive Mistakes. Kiplinger.com. https://www.kiplinger.com/retirement/inherited-an-ira-avoid-these-common-mistakes

2 IRS. (2025, November 13). 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500. IRS.gov. https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500

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