Amazon Mega-Backdoor Roth: Tax-Efficient Retirement Savings in 2025

How Amazon’s Mega-Backdoor Roth Works

The mega-backdoor Roth is a strategy for saving more aggressively and tax-efficiently for retirement by making after-tax contributions to a 401(k) plan and then converting those contributions to a Roth IRA or Roth 401(k).

To avoid a future tax headache, it is critical for Amazon employees to convert after-tax 401(k) contributions to either a Roth 401(k) or Roth IRA.

2025 Amazon 401(k) Total Contribution Limits by Age

Under Age 50

• Elective deferral: $23,500
• Employer match: Up to $7,000*
• Catch-up contribution: None
• After-tax contribution: ~$40,000**
• Total limit: $70,000

Age 50 to 59 and Over 63

• Elective deferral: $23,500
• Employer match: Up to $7,000*
• Catch-up contribution: $7,500
• After-tax contribution: ~$40,000**
• Total limit: $77,500

Age 60 to 63

• Elective deferral: $23,500
• Employer match: Up to $7,000*
• Catch-up contribution: $11,250
• After-tax contribution: ~$40,000**
• Total limit: $81,250

*Amazon matches 50% of elective deferrals up to 4% of eligible pay, with a maximum of $7,000. Catch-up contributions are not eligible for matching.

**For Amazon employees utilizing the mega-backdoor Roth strategy in 2025, the amount they can contribute as after-tax contributions is the difference between the total 401(k) contribution limit and the combined limits for elective deferrals, employer matching, and catch-up contributions.

Amazon 401(k) Mega-Backdoor Roth Tax Consequences

After-tax 401(k) contributions are not taxed when distributed. However, if left untreated, after-tax earnings are taxed as ordinary income when distributed from the 401(k).

So, why would anyone utilize after-tax contributions? After-tax 401(k) contributions grow tax-free after the funds are converted to a Roth IRA or Roth 401(k). Without a Roth conversion, there are generally more tax-efficient ways to save for retirement than by participating in an after-tax 401(k).

How to Complete the Amazon Mega-Backdoor Roth Step-by-Step

Here are steps for executing the mega-backdoor Roth:

• Determine if the mega-backdoor Roth makes sense within your financial plan.
• Determine what percentage of your paycheck you want to allocate toward after-tax 401(k) contributions.
• Update the after-tax percentage online via Fidelity Net Benefits. Processing may take up to one or two pay cycles.
• Have a process in place for converting funds from after-tax 401(k) to Roth IRA or Roth 401(k).

Amazon Mega-Backdoor Roth Case Studies

Jeff – 60 years old

Jeff is a product manager at Amazon. Jeff earns $500,000 annually and wants to save more for retirement using the mega-backdoor Roth strategy.

• Jeff contributes $23,500 as an elective deferral and an additional $11,250 as a catch-up contribution.*
• Amazon matches $7,000.
• Jeff can contribute an additional $39,500 in after-tax savings.

*Important Note: The age 60 to 63 catch-up contribution is a new rule for 2025. Please confirm the amount with your 401(k) plan administrator.

Mark – 55 years old

Mark is an account executive at Amazon. Mark earns $250,000 annually and wants to save more for retirement using the mega-backdoor Roth strategy.

• Mark contributes $23,500 as an elective deferral and $7,500 as a catch-up contribution.
• Amazon matches $5,000.
• Mark can contribute an additional $41,500 in after-tax savings.

Kelly – 48 years old

Kelly is a senior director at Amazon. Kelly earns $300,000 annually and wants to save more for retirement using the mega-backdoor Roth strategy.

• Kelly contributes $23,500 as an elective deferral.
• Amazon matches $6,000.
• Kelly can contribute an additional $39,000 in after-tax savings.

Why the Amazon Mega-Backdoor Roth Matters in 2025

Most companies do not offer the mega-backdoor Roth strategy. Without a doubt, the mega-backdoor Roth is one of the most valuable benefits for high-income Amazon employees. The mega-backdoor Roth provides a lucrative opportunity for Amazon employees seeking to enhance tax-free retirement savings. However, it’s important to acknowledge that it’s not for everybody!

Here are some pros and cons for using the Amazon mega-backdoor Roth:

Pros

• The mega-backdoor Roth creates a tax-free savings opportunity.
• Investments grow tax-deferred.
• Funds can later be distributed tax-free during retirement.

Cons

• The mega-backdoor Roth is for long-term savings that are not easily accessible until retirement. Should you need funds sooner, then other account types may offer better accessibility.
• Pre-tax and Roth 401(k) contributions receive an employer match, but after-tax savings do not.
• Missing a step while attempting to complete this advanced planning strategy may unknowingly create a major tax headache for future you.

Take the time to determine if the mega-backdoor Roth is right for your unique financial situation. Consulting with a fiduciary financial planner can help provide peace of mind for you and your family.

If you’re an Amazon employee and have questions about after-tax 401(k) savings or the mega-backdoor Roth strategy, feel free to contact me at [email protected].