Mega Backdoor Roth Advantage Calculator

Quantify how much extra wealth a mega backdoor Roth conversion can preserve relative to keeping after-tax 401(k) dollars invested in a taxable brokerage. Enter the annual contribution, the blended tax drag you incur on taxable returns, your expected growth rate, and the holding period. The calculator shows the projected Roth balance, taxable balance, and the advantage gap so you can benchmark whether the additional plan complexity is worthwhile.

Annual after-tax dollars you can funnel into in-plan conversions beyond regular deferrals.
Blended annual tax drag applied to the taxable alternative (e.g., dividend and capital-gains taxes).
Long-term growth rate assumed for both Roth and taxable portfolios (nominal annual percentage).
How long the conversion remains invested before withdrawals begin. Use whole years for clarity.

Calculations assume steady returns and tax drag. Confirm plan rules, rollover timing, and tax consequences with your plan administrator and fiduciary advisor before executing conversions.

Examples

  • $38,000 contribution, 32% tax drag, 7% return, 20 years ⇒ Roth balance reaches $147,048.01 versus $96,314.88 in taxable. That leaves $50,733.13 more kept inside the Roth wrapper after two decades.
  • $15,000 contribution, 24% tax drag, 5% return, 8 years ⇒ Roth balance grows to $22,161.83 while taxable lands at $20,214.83. The Roth path keeps $1,947.00 extra for future withdrawals.
  • $25,000 contribution, 18% tax drag, 6% return, 12 years ⇒ Roth grows to $43,951.96 while taxable ends at $37,385.46, preserving an extra $6,566.50.

FAQ

Can I change the assumed tax drag mid-horizon?

Adjust the marginal tax drag input to reflect your best estimate for annual taxable friction, combining dividend taxes and capital gains harvesting.

How do employer match limits impact this model?

The calculator isolates after-tax contributions eligible for mega backdoor conversions. Ensure your plan still allows regular deferrals and employer matches within IRS limits before adding after-tax dollars.

What if my returns are lower in the first few years?

Test conservative return assumptions or shorter holding periods. Lower growth compresses the advantage, but the Roth still shields gains from annual taxes.

Does the model account for required minimum distributions?

No. The projection stops at the chosen horizon. Roth IRAs are not subject to RMDs for the original owner, while taxable accounts remain exposed to ongoing taxes.

How do plan fees or advisor expenses change the outcome?

If the Roth conversion path carries additional plan fees, subtract those from the annual contribution. If your taxable brokerage has advisory fees, include them in the tax drag percentage to simulate the reduced net return.

Additional Information

  • Model assumes after-tax contributions convert to Roth immediately, avoiding additional conversion taxes or plan limits.
  • Tax drag reduces the taxable account's effective annual return each year rather than applying only at liquidation.
  • Use a lower tax drag to approximate qualified dividend and long-term capital gains treatment, or higher values if you realise short-term gains.
  • Run shorter horizons to understand break-even timelines before tapping retirement funds.
  • Compare scenarios with different contribution sizes to see how close you are to the IRS annual after-tax contribution maximums.

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