Your Intel 401(k) and the Mega Backdoor Roth
If you're a high-earning Intel employee, Intel's mega backdoor Roth program can help you save significantly more money for retirement. In fact, this strategy could be one of the most valuable financial benefits you have.
What Is the Mega Backdoor Roth?
The mega backdoor Roth is a program that lets high-earning employees contribute even more to a tax-advantaged savings account. To do this, you will:
Max out your 401(k) contributions.
Contribute additional after-tax funds beyond the standard IRS 401(k) limits.
Convert those funds to a Roth account.
This has several benefits. First, it allows you to contribute more savings beyond both 401(k) and IRA limits. It also gives you access to the benefits of a Roth IRA even if you earn more than the IRS income thresholds.
This is called a "mega backdoor Roth" because of the much larger contributions it allows compared to the regular backdoor Roth strategy. While a standard backdoor Roth might let you get $7,000 into a Roth account, the Mega Backdoor Roth can potentially move $40,000 to $50,000 or more, depending on your situation.
Not all employers offer the plan features needed to make this work. Intel does, which is great news for any high-earning Intel employee.
How Intel's Plan Makes This Possible
Intel's 401(k) plan has special features that most employers don't offer. Here's what makes the mega backdoor Roth work:
After-tax contributions: Intel allows you to make after-tax contributions beyond your regular 401(k) contributions. These don't give you a tax deduction now, but they also won't be taxed again when you withdraw them.
In-plan Roth conversions: You can convert your after-tax contributions to Roth status right within Intel's plan. This moves your money from after-tax to Roth, where all future growth will be tax-free.
High contribution limits: The total annual limit for all 401(k) contributions is $70,000 in 2025 (or $77,500 if you're 50 or older). This leaves plenty of room for after-tax contributions on top of your regular 401(k) savings.
Step-by-Step: How to Use the Mega Backdoor Roth at Intel
Step 1: Max Out Your Regular 401(k)
Before using the mega backdoor Roth, make sure you're getting Intel's full match on your regular 401(k). For 2025, you can contribute $23,500 to your traditional or Roth 401(k), or $31,000 if you're 50 or older.
Step 2: Figure Out Your After-Tax Space
Take the total limit ($70,000) and subtract your regular 401(k) contributions and Intel's matching contributions. What's left is your space for after-tax contributions.
For example, if you contribute $23,500 and Intel matches $5,000, you have $41,500 available for after-tax contributions. That’s a lot of extra savings!
Step 3: Set Up After-Tax Contributions
Log in to your Fidelity account and add after-tax contributions to your payroll deductions. You can usually do this anytime, but check Intel's specific rules about timing and limits.
Step 4: Convert to Roth (Quickly!)
This step is crucial. Don't let your after-tax contributions sit and grow. Convert them to Roth as soon as possible after each paycheck.
Why the rush? Any earnings on your after-tax contributions become taxable when you convert them. By converting quickly, you avoid this tax hit.
Step 5: Plan for When You Leave Intel
When you retire or change jobs, you can leave your Roth money in Intel's plan or roll it to a Roth IRA for more investment choices.
Who Should Use This Strategy?
The mega backdoor Roth works best if you:
Earn too much for regular Roth IRA contributions: In 2025, you can't contribute to a Roth IRA if your income exceeds $165,000 (single) or $246,000 (married filing jointly).
Have maxed out other retirement accounts: You should be contributing the maximum to your regular 401(k) before using this strategy.
Have extra cash flow: After-tax contributions come from your take-home pay, so you need enough money to cover your expenses and these additional contributions.
Plan to stay at Intel: This strategy works best when you can make after-tax contributions consistently over several years.
Want tax-free money in retirement: Having both traditional and Roth accounts gives you flexibility to manage taxes later.
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Tax Rules You Should Know
The mega backdoor Roth creates several important tax considerations that you need to understand before diving in.
No Current Tax Break
After-tax contributions don't reduce your current taxable income like regular 401(k) contributions do. If you contribute $30,000 in after-tax dollars, you don't get to deduct that from your taxes. You're paying taxes on that income now, which is why the future growth can be tax-free.
Conversion Taxes
You'll owe taxes on any earnings that accumulate before you convert to Roth. Let's say you contribute $2,000 in after-tax dollars one month, and it grows to $2,050 before you convert it. You'll owe taxes on that $50 of growth when you do the conversion. This is exactly why quick conversions are so important.
Tax-Free Growth Forever
Once your money is in Roth status, all future growth is completely tax-free. If that converted money grows from $30,000 to $300,000 over 20 years, you'll never owe taxes on that $270,000 of growth. And when you withdraw it in retirement, it's all tax-free.
No Required Withdrawals
Traditional 401(k)s and IRAs force you to start taking money out at age 73, whether you need it or not. Roth accounts don't have this requirement during your lifetime. You can let the money grow indefinitely and leave it all to your heirs if you want.
State Tax Considerations
These rules generally apply to state taxes, but check your specific state's rules to make sure. Some states don't tax retirement account withdrawals at all, which makes the Roth benefit even more valuable.
What Happens When You Leave Intel?
When you retire or change jobs, you have several options for your Roth 401(k) money. See below:
Stay in Intel's Plan
You can leave the money where it is indefinitely. Intel can't force you to take it out just because you're no longer employed there. However, you won't be able to make new contributions, and you'll be stuck with Intel's investment options and any fees they charge former employees.
Roll to Roth IRA
Moving to a Roth IRA gives you access to thousands more investment options and potentially lower fees. The rollover doesn't create any taxable income since you're moving Roth money to another Roth account. You'll have more control over your investments and can often get better customer service.
A Little of Both
You might roll some money into a Roth IRA while leaving some in Intel's plan. This could make sense if Intel has some investment options you really like, or if you're trying to satisfy the five-year rule timing for different chunks of money.
Split Rollover
If you also have after-tax contributions that haven't been converted yet when you leave Intel, you can do what's called a "split rollover." The after-tax contributions can go directly to a Roth IRA tax-free, while any earnings on those contributions would go to a traditional IRA to avoid extra taxes.
How Much Could the Mega Backdoor Roth Save You?
To get a clearer idea of how valuable the mega backdoor Roth can be, let’s look at an example.
Example #1: Meet Sarah
Sarah is a 35-year-old Intel software engineer earning $180,000 annually. Sarah contributes $23,500 to her traditional 401(k) and gets a $9,000 company match from Intel.
Since the total contribution limit is $70,000, minus her $23,500 contribution and $9,000 match, that leaves $37,500 for after-tax contributions. So, Sarah contributes $37,500 in after-tax dollars throughout the year and converts it to Roth monthly to minimize taxable earnings.
If Sarah continues this strategy for 20 years until she's 55, contributing $37,500 annually and earning 7% average returns, she'll have accumulated over $1.5 million in her Roth account. That's $1.5 million she'll never pay taxes on again, no matter how much it continues to grow or what happens to tax rates.
How does that compare to the usual options? If Sarah could only make a regular Roth IRA contribution of $7,000 annually (which she can't because of income limits), she'd have only about $300,000 after 20 years. The mega backdoor Roth gives her five times more tax-free money.
And when Sarah retires, she can withdraw from this Roth money completely tax-free. If she's in a 25% tax bracket in retirement, that $1.5 million of Roth money is equivalent to having $2 million in a traditional 401(k).
Example #2: Meet David
Even Intel employees nearing retirement can benefit greatly from using the mega backdoor Roth program.
For example, David is a 55-year-old Intel engineering manager earning $220,000 annually. He's planning to retire at 62 and just learned about the mega backdoor Roth strategy.
David contributes $31,000 to his traditional 401(k) (including the $7,500 catch-up contribution for being over 50) and gets a $11,000 company match from Intel. The total contribution limit is $77,500 for those over 50, minus his $31,000 contribution and $11,000 match, leaving $35,500 for after-tax contributions.
Naturally, David contributes $35,500 in after-tax dollars throughout the year and converts it to Roth monthly to minimize taxable earnings. If David continues this for 7 years until age 62, contributing $35,500 annually and earning 6% average returns, he'll accumulate about $280,000 in his Roth account.
As you can see, even with just 7 years until retirement, this strategy can be powerful!
When David retires and starts drawing down his savings, he can strategically withdraw from his traditional 401(k) up to the top of lower tax brackets, then supplement with tax-free Roth withdrawals. This tax diversification can save him thousands annually in retirement.
And unlike traditional 401(k)s, Roth accounts don't have required minimum distributions during David's lifetime. If he doesn't need all the money, it can continue growing tax-free and pass to his heirs as tax-free inheritance.
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Is the Mega Backdoor Roth at Intel Right for You?
The mega backdoor Roth can be incredibly powerful, but it's not for everyone. Consider this strategy if:
You're consistently maxing out your regular 401(k) contributions ($23,500 for 2025)
You're getting Intel's full company match
You have significant disposable income after covering all your expenses and building an emergency fund
You expect to be in a similar or higher tax bracket in retirement
You want more tax-free money for estate planning purposes
You're comfortable with the ongoing management this strategy requires
It may not be ideal for you if:
You're not yet maxing out your regular 401(k) or getting the full Intel match
You're struggling to cover your basic living expenses
You don't have an adequate emergency fund (3-6 months of expenses)
You have high-interest debt you should be paying off first
You might need access to this money within the next 5 years
You expect to be in a much lower tax bracket in retirement
Getting Professional Help
The mega backdoor Roth involves multiple moving parts, ongoing tax considerations, and coordination with your other financial goals. It's not something you want to mess up.
At TrueWealth Financial Partners, we specialize in helping you optimize your finances and save more for retirement. We understand the unique aspects of Intel's benefits package and how the mega backdoor Roth fits into your broader financial strategy. We can help you implement this correctly and avoid costly mistakes that could undermine the strategy's benefits.
We’re also fee-only fiduciary advisors. That means we don't sell products or earn commissions from investment companies. Our compensation comes solely from our clients, so our advice is always designed to serve your best interests, not ours.
Ready to explore whether the mega backdoor Roth is right for you?
Schedule a free consultation, and we can review your plans and help you determine if this strategy makes sense for you.
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FAQs
How much can I contribute using the mega backdoor Roth?
It depends on your regular 401(k) contributions and Intel's match. For 2025, the total limit is $70,000 ($77,500 if you're 50+). Subtract your regular contributions and company match to find your after-tax space. Most Intel employees can contribute $35,000 to $45,000 annually using this strategy.
Can I still do a regular backdoor Roth IRA if I'm using the mega backdoor Roth?
Yes, these are completely separate strategies. You can do both in the same year as long as you meet the requirements for each.
What if I leave Intel before retirement? Do I lose this benefit?
You would lose the ability to make new after-tax contributions once you leave Intel, but any money already in your Roth 401(k) stays yours. You can roll it to a Roth IRA or leave it in Intel's plan.
Can I use this strategy if I'm planning to retire early?
Absolutely. The mega backdoor Roth can be especially valuable for early retirees because Roth accounts don't have required minimum distributions and provide tax-free income flexibility.
What happens if tax rates change in the future?
This is actually one of the benefits of Roth accounts. Once your money is converted to Roth, future tax rate changes don't affect those funds. Your withdrawals will always be tax-free regardless of what happens to tax policy.
Can I roll my mega backdoor Roth money to any Roth IRA provider?
Yes, when you leave Intel, you can roll your Roth 401(k) balance to any Roth IRA provider you choose. This gives you access to more investment options and potentially lower fees.