He Put After-Tax Money Into His 401(k) for Nine Years and Converted It Every January.
He Retired at 62 With $610,000 the IRS Will Never Tax Again
Quick Read – The $72,000 combined 401(k) ceiling creates up to $47,500 in annual after-tax contribution room that converts to permanently tax-free Roth growth, with no income limit. – To use this strategy, your plan must allow both after-tax contributions and in-plan Roth conversions, which are features far more common at large tech and finance employers. – Earnings on after-tax contributions are taxed as ordinary income at conversion, making annual or per-paycheck rollovers essential to keeping the strategy clean. – Hidden Third Bucket in Your 401(k) If your 401(k) plan allows after-tax contributions above the standard deferral cap, you have access to a lesser-known provision in the retirement code: the mega backdoor Roth. The nine-year retiree in the headline used exactly that. He funneled after-tax dollars into his plan’s third bucket, converted the balance to Roth every January, and retired at 62 with a Roth balance that will not be taxed again.
Plans that offer the required mechanics allow you to replicate the same approach. What the Buried Rule Actually Says Your 401(k) plan gives you three separate contribution buckets to work with. There is the pretax bucket, the Roth bucket, and an after‑tax bucket.