Divorce the IRS

Welcome to Divorce the IRS, the Retirement Income Planning Podcast—built for people who want to pay the least amount of taxes possible and create retirement income that actually lasts. Inspired by Jimmy Miller’s bestselling book Divorce the IRS, this show takes you behind the scenes of the tax rules, retirement strategies, and planning decisions that can quietly determine how much of your money you keep.

The truth is, taxes aren’t just “something you deal with later.” The U.S. tax code is massive, confusing by design, and full of traps that can hit hardest right when you need your money most. From 401(k)s and IRAs to Social Security and Medicare, many common “smart moves” can turn into expensive surprises—like required minimum distributions, Medicare surcharges, the widow’s penalty, and other retirement tax time bombs most people don’t see coming until it’s too late.

With 20+ years of experience as a global wealth manager, Jimmy breaks these topics down in a clear, practical way—so you can plan proactively, avoid unnecessary taxes, and build a retirement where your delayed gratification finally pays off. Subscribe so you never miss an episode, and remember: this podcast is for general education only and isn’t legal, tax, or investment advice—always consult a qualified professional for guidance specific to your situation.

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Divorce the IRS

Mega Backdoor Roth Explained

May 25, 2026

0:00 | 7:20

One of the biggest misconceptions in retirement planning is the idea that high earners are locked out of Roth IRAs forever.

They’re not.

In this episode of The Divorce the IRS Podcast, we break down one of the most powerful advanced Roth strategies available today: the Mega Backdoor Roth.

This strategy allows certain investors to move significantly larger amounts of money into Roth accounts through their employer-sponsored retirement plans, even if they earn too much to contribute directly to a Roth IRA.

We explain how the Mega Backdoor Roth works inside many 401(k) and 403(b) plans, including the role of after-tax contributions, Roth 401(k) salary deferrals, employer matching contributions, and IRS total contribution limits.

You’ll learn how some retirement plans allow participants to contribute far beyond the standard employee contribution limits and why understanding your specific plan provisions is critical before implementing this strategy.

We also walk through a detailed example showing how investors may be able to move tens of thousands of additional dollars into Roth accounts each year through after-tax contributions and Roth conversions.

If your goal is to build more tax-free retirement income and maximize long-term tax flexibility, understanding the Mega Backdoor Roth strategy could be an important piece of your retirement plan.

In This Episode

• What the Mega Backdoor Roth strategy is
• How Roth 401(k) contributions differ from Roth IRAs
• Why high earners may still have powerful Roth opportunities
• Understanding total 401(k) contribution limits
• How employer matching and profit sharing factor into the calculation
• What after-tax 401(k) contributions are
• How after-tax contributions may later convert into Roth assets
• Why some plans allow in-service Roth conversions
• A real-world Mega Backdoor Roth example explained step-by-step
• Important planning considerations before implementing the strategy

What’s Coming Next

• Roth conversion strategies explained
• How retirees may create more tax-free retirement income
• Tax planning opportunities involving pre-tax retirement accounts
• Advanced Roth planning concepts for long-term retirement flexibility

SPEAKER_00 0:01

Welcome to the Divorce the IRS Podcast, the retirement income planning podcast designed specifically for those who want to pay the least amount of taxes possible and build a retirement income that lasts. Inspired by the best-selling book, Divorce the IRS, you get to go behind the scenes with financial planner, author, and speaker Jimmy Miller. Learn how to set yourself up to pay the least amount of taxes in retirement when you'll need your money the most. And now, here's your host, Jimmy Miller.

SPEAKER_01 0:27

Welcome. Welcome to episode 21 of the Divorce the IRS podcast. Today we'll continue the technical discussion and learn about the second strategy designed for higher earners, which enables them to get considerable amounts of money into Roth accounts. This strategy is called the Mega Backdoor Roth strategy. This strategy utilizes your 401k at work, where you probably already have a 401k Roth option. And if you do, that's great. And it's yet another way to fund a Roth without income restrictions, as there are no income restrictions on contributing to a Roth 401k in your workplace. If you have a regular 401k without a Roth option, which is very rare these days, you may still ultimately be able to use it to fund a Roth IRA for yourself. If you do have a Roth option in your 401k, and over 95% of the plans now have this option, you can contribute without income restrictions up to $24,500 with salary deferrals directly into the Roth 401. If you are age 50 to 59 or 64 or older, you're eligible for an additional $8,000 in catch up contributions as well. And beginning last year in 2025, those between 60 and 63 will be eligible to contribute up to 11,250 as catch up contributions. This means those 50 to 59 or 64 and older will be able to contribute up to $32,500 in 2026, and those 60 to 63 will be able to contribute up to $35,750. Now, depending on your plan, you may also be able to make post-tax contributions beyond the pre-tax and Roth contribution limits up to the IRS 401k limit. Now most people don't know that the total contribution limit in a 401 or a 403B plan in 2026 is $72,000 for those under $50 and $80,000 for those over 50 years old. This is the total contribution limit from all sources, including what you put in, what the company matches, and any profit sharing that may be contributed as well. Let's take a look at a quick example. So let's say you're 50 years old, you make $200,000, and you have a 401k at work. You contribute your max of $32,500 directly into the Roth 401k, and your employer gives you a nice 5% match on your salary. Thus, your employer is going to contribute $10,000 into your 401k for you as a match. That brings the total contributions between you and your employer up to $42,500. Now let's say that your employer is also going to contribute some more money to your 401k at the end of the year in the form of profit sharing. And this contribution is another $7,500. Now, with this contribution, your total contributions in the 401k now come to $50,000. The actual IRS contribution limit per year for you, since you're 50 years old in this example, is $80,000. So there is actually another $30,000 that could be contributed to your plan legally. How might you go about getting another $30,000 into your $0.1K plan at work? You ask? Well, I'm glad you asked. Have you ever noticed that when you make your $401 elections, you can specify if you'd like to make after-tax contributions? Almost all plans have this option, but almost no one chooses it. If you put money into this option, it comes out of your paycheck after it has been taxed, just like a Roth, and it's invested tax deferred into your 401k. There is also no limit on how much you can contribute using this category of contributions as long as the total contributions stay under that $80,000 in my example. If you're over $50, so in our example above, you could contribute another $30,000 to your 401k plan at work after tax to bring the total contributions for the year up to the legal IRS limit of $80,000. This extra after tax deduction is what we call the mega backdoor Roth. Now this works like a Roth because the contributions are after-tax contributions, just like a Roth IRA. And when you leave your job one day and roll over that $401, all the money you contributed after tax is eligible to roll directly into your personal Roth IRA. Some plans even allow in-service withdrawals of after-tax money, meaning you can move it into your Roth even while you're still employed and contributing. You should check with your plan administrator to learn about the specific rules for your plan. So if you used the information in the last episode and contributed $8,600 into a personal Roth account using the Backdoor Roth strategy, you can now add another $62,500 to your Roth accounts by contributing the max $32,500 to your Roth 401k at work and then maxing out your after-tax 401k contributions, which is another $30,000 in our example. It may be even more in your situation. Using our example, you're putting away $71,100 into Roth accounts in one year, and all along you thought you made too much money to contribute to and utilize Roth accounts in your financial plan. Now deciding if either of these strategies is right for you involves a fair amount of financial planning and tax projections. If you would like help figuring out if you should use either strategy to fund a Roth IRA, do your research or contact a fiduciary financial planner for help. If you want to put even more money into the Roth IRA, you likely can, using Roth Conversions, which we're going to cover in the next episode.

SPEAKER_00 6:43

Want even more ideas, tools, and resources on how to navigate your financial life? Check out all the resources on the Divorce the IRS website at divorce-the-IRS.com or the Bayob Wealth website at bayablewealth.com and subscribe to the blog to stay up to date on issues affecting retirement income planning. Don't forget to subscribe to the podcast so you never miss an episode. Bayob Wealth and Bayabut Wealth Abroad are DBAs of Bayob Wealth LLC, a Florida registered investment advisor. This podcast is designed for general education purposes only and shouldn't be taken as legal investment or tax advice. You should seek out a qualified tax professional or licensed financial advisor to determine what is best for your personal situation.