Roth IRAs are one of the greatest gifts ever given to retirement savers. They enable individuals who qualify to enjoy tax-free withdrawals of their money after they retire, or even earlier in some situations. This can help retirees stretch their nest eggs even further.\r\n\r\nStressing about taxes? Download Your FREE Guide: "5 Tax Hacks for Investors" \r\n\r\nBut there\u2019s one big catch when it comes to Roth IRAs: If you earn too much money, you can\u2019t open or contribute to one. Specifically, if your modified adjusted gross income (MAGI) is greater than $139,000 if you\u2019re single or $206,000 if you\u2019re married and file jointly this year, you can\u2019t open and contribute to a Roth IRA. \r\n\r\nThe good news is that you can still reap the benefits of a Roth account even if your income exceeds these limits by using a technique known as a mega backdoor Roth. This strategy may also enable you to sock away tens of thousands of dollars more for retirement this year.\r\n\r\nRead More: Roth IRA vs. Roth 401k: How are They Different?\r\n\r\nIs a Mega Backdoor Roth Right for You?\r\nThe first step is to determine whether you are actually eligible for a mega backdoor Roth or not. You can only do a mega backdoor Roth if these conditions are present:\r\n\r\n\r\nYou participate in a 401k plan at work that allows after-tax contributions. Regular 401k contributions are made on an elective deferral, or pre-tax, basis. Fewer than half of 401k plans allow after-tax contributions, so check with your benefit plan administrator before moving forward.\r\nThe 401k plan allows in-service distributions to a Roth IRA or transfer of funds out of the after-tax portion of the account into a Roth 401k. If it doesn\u2019t, you\u2019ll have to wait until after you leave the company to perform a mega backdoor Roth.\r\n\r\n\r\nHow Does a Mega Backdoor Roth Work?\r\nIf you can check the box on each one of these conditions, then you may qualify to for a mega backdoor Roth IRA. Here\u2019s how the process works:\r\n\r\nDetermine and make the maximum after-tax contribution you can to your traditional 401k account.\r\nRollover or convert this amount to a Roth IRA or Roth 401k. Unlike with a normal Roth IRA conversion, the principal will not be taxable. However, the earnings portion of the rollover will be considered pre-tax and subject to taxation at time of the conversion.\r\n\r\n\r\nHow Much Can You Contribute?\r\nWith a mega backdoor Roth, you may be able to contribute an additional $37,500 toward your retirement this year on top of the regular plan contribution limits. If you have access to a Roth 401k at work, you can decide whether to rollover the funds into this Roth 401k or a separate Roth IRA. If your employer only offers a traditional 401k, then you\u2019ll rollover the funds into a Roth IRA.\r\n\r\nThe bottom line: If you are unable to contribute to a Roth IRA because you earn too much money, or if you still have money left over to save for retirement after maxing out your regular 401k and IRA, then a mega backdoor Roth might be a smart strategy for you.\r\n\r\nThe details in performing a mega backdoor Roth can be complex, so you should consult with your financial and tax advisors for guidance in your situation.\r\n\r\nSuggested Next Steps for You:\r\n\r\nSign up for Personal Capital's free financial tools so you can track all of your accounts, including your retirement accounts, in one place. The tools will also help you spot inefficiencies, like where you may be paying too much in fees, or where you may be taking too much risk.\r\nDownload your free guide to managing tax burden as an investor.\r\n\r\n\r\nWe are not licensed tax professionals. All insight provided represents a courtesy extended to you for educational purpose and you should not rely on this information as the primary basis of your tax planning decisions. You should consult qualified legal or tax professional regarding your specific situation.