Fidelity Backdoor Roth 401k: A Comprehensive Guide

The Fidelity Backdoor Roth 401(k) is a popular strategy for high-income earners who want to contribute to a Roth IRA. This strategy allows you to convert a traditional 401(k) contribution to a Roth IRA, effectively avoiding the income limits that apply to direct Roth IRA contributions.

Fidelity is one of the many providers that offer this feature, making it accessible to a wide range of investors. To take advantage of this option, you'll need to have a traditional 401(k) account with Fidelity and a non-deductible traditional IRA.

The key benefit of the Fidelity Backdoor Roth 401(k) is that it enables you to make large contributions to a tax-free retirement account, even if you're earning too much to qualify for direct Roth IRA contributions. This can be a game-changer for high-income earners who want to build a large tax-free nest egg.

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To set up a Mega Backdoor Roth, you'll need to determine if your current plan allows for this option. If not, you'll have to create a custom plan document with a Mega Backdoor option.

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You'll need to create or amend the plan document to include the Mega Backdoor option. This can be done by creating a custom plan document with a provider or by creating an entirely new 401(k) plan and custodial accounts.

Setting up the investment accounts is a crucial step. You'll need to establish three separate accounts: pre-tax contributions, after-tax contributions, and Roth contributions. It's recommended to break these accounts out separately for tracking purposes.

You should determine the investment options for each account. For Roth and after-tax money, you should invest in more aggressive options, while pretax deferral or profit-sharing amounts should be invested more conservatively.

To establish pretax and after-tax contributions, you should consider the Mega Backdoor's three components: deferral, profit-sharing, and after-tax contributions. You can select the Roth 401(k) deferral option and make after-tax contributions instead of profit-sharing.

Here's a summary of the steps to set up a Mega Backdoor Roth:

1. Determine if your current plan allows for the Mega Backdoor option

2. Create or amend the plan document to include the Mega Backdoor option

3. Set up the investment accounts (pre-tax, after-tax, and Roth contributions)

4. Determine the investment options for each account

5. Establish pretax and after-tax contributions

By following these steps, you can set up a Mega Backdoor Roth and take advantage of its benefits, including tax-free contributions and withdrawals.

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Managing your Fidelity Mega Backdoor Roth is a straightforward process. Just call Fidelity Workplace Planning at 800-557-1900 and request to add "Automatic Roth In-Plan Conversion" to your account.

To verify your Mega Backdoor is set up, log back into fidelity.com, click on your 401(k) account, and view your balances. If you see "Roth In-Plan Conversion" in the legend, you're all set!

You'll need to change your contribution amount to take advantage of the Mega Backdoor Roth. This can be done by clicking on the "Manage Your Contribution Amount" link and adjusting the "Contribution Amount per Pay Period" in the After Tax Deferral section.

The max contribution limit for the After Tax Deferral section is calculated using a formula: Max Mega Backdoor Roth contributions = $70,000 - (employee 401(k) contributions) - (employer match contributions) in 2025. For example, if you max out your traditional 401(k) at $23,500 and your employer match contributions are $14,000, then your max Mega Backdoor Roth contributions would be $32,500.

You can see how much you've contributed to each section of your 401(k) by looking at the "Sources" pie chart.

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To enable automatic Roth in-plan conversions with Fidelity, you'll need to call their Workplace Planning department at 800-557-1900.

Just tell them you'd like to add "Automatic Roth In-Plan Conversion" to your account. If the person who answers doesn't know how to do that, no worries - just call back later.

Warning: if you don't take this step, your after-tax contributions will sit in your traditional 401(k), which is very bad for tax and penalty reasons.

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To enable automatic Roth in-plan conversions, call Fidelity Workplace Planning at 800-557-1900.

You'll need to tell them you'd like to add "Automatic Roth In-Plan Conversion" to your account. If the person who answers doesn't know how to do that, just call them again later.

If you don't do this step, your after-tax contributions will sit in your traditional 401(k), which is very bad for tax and penalty reasons.

To convert a traditional 401(k) or 403(b) plan to a Roth plan, you'll need to follow Fidelity's in-plan conversion process. This process typically involves a few simple steps.

You can start by checking your plan's eligibility, as not all plans offer in-plan conversions. Fidelity's in-plan conversion is available for certain employer-sponsored plans, such as 401(k) and 403(b) plans.

To initiate the conversion process, you'll need to contact Fidelity's customer service or log into your account online. This will prompt a review of your account and plan eligibility.

You'll then need to decide how much of your traditional account balance you want to convert to a Roth account. Keep in mind that you can convert any amount, including a portion of your balance.

The converted amount will be subject to income taxes, which will be withheld from your account. You can choose to pay the taxes with a lump sum or through a series of installments.

The conversion process typically takes a few weeks to complete, and you'll receive a confirmation letter once the process is finished.

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