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Optimizing Your Amazon Employee Benefits

Amazon provides their employees with a robust benefits package. In this post I breakdown the major components of Amazon’s employee benefits so that you can optimize your benefits given your unique financial situation. The biggest levers you can pull come in your 401K choices, how you handle Restricted Stock Units (RSUs), and your health insurance selection. 


Amazon offers a relatively low 401K match. The Company will match 50% of your eligible contributions up to 4% of your eligible pay. Thus the maximum match from Amazon is 2%. 

Employees can contribute from 1% to 90% of their eligible pay on a pre-tax basis, a Roth after-tax basis, or both, subject up to the annual IRS limits. For 2022, the limit is $20,500 ($27K if you turn 50 or older in 2022). 

Mega Backdoor Roth Contributions

In the past, Amazon limited after tax contributions to 10% of an employee’s salary. Amazon made a recent change to their 401K plan that will allow employees to contribute up to the Federal 401K limit towards the after-tax portion of their 401K. This means that Amazon employees can now make Mega Backdoor Roth IRA Contributions (At least as long as it is allowed, which may change if Build Back Better is passed in the future). 

For 2022, the Federal limit for total contributions to a 401K is $61K. To make a backdoor contribution you would first max out your normal 401K contribution of $20,500 while receiving Amazon’s maximum match of $3,200 (based on 2% of Amazon’s highest salary of $160K). You can now contribute an additional $37,300 in after-tax contributions to hit your $61K total federal contribution limit. You can then immediately convert that $37,300 in after tax contribution dollars into a Roth. The following graphic helps illustrate this:

***2/7/22 Update***

With the recent announcement that Amazon’s maximum base salary is increasing from $160K to $350K there will be some changes to the mega backdoor Roth numbers for highly compensated employees. Assuming no other changes Amazon could now match up to $7K for someone making the maximum salary. That means an employee could make an additional after tax contribution of $33,500 that could be rolled over to a Roth.

Restricted Stock Units (RSUs)

RSUs frequently make up a large portion of compensation at Amazon. Amazon’s vesting schedule is more heavily weighted towards later years than most other companies with heavy stock compensation. 

Here’s the typical vesting schedule for Amazon RSU compensation:

  • Year 1:   5%
  • Year 2: 15%
  • Year 3: 40%
  • Year 4: 40%

I’ve covered RSUs on the blog in the past. Given Amazon’s heavy use of RSUs in compensation packages and the heavy weighting in years 3 and 4 employee comp is more dependent on Amazon’s stock performance than a typical employee compensation package. Given the fantastic performance of Amazon stock over the past decade employees haven’t had much cause for complaint. However, this can cut both ways and could be a significant risk for an employee moving forward. 

Health Insurance

Amazon offers a number of medical insurance plans for employees. One option is a high deductible health plan that offers a Health Savings Account (HSA). 

The 2022 contribution limit to an HSA is $3,650 for an individual and $7,300 for a family. That limit includes employer contributions made on your behalf. Amazon has been contributing $500 for an individual, $1,000 for a married employee, and $1,500 for a married employee with kids. 

Personally I’m a fan of HSA plans. HSA funds are a great vehicle as they grow tax-free and have no required withdrawals. As long as withdrawals are used for qualified medical expenses any withdrawals are tax free. 

Basic vision and dental are also offered as part of Amazon’s health insurance packages. 

Life Insurance

Amazon offers employees free life insurance equal to two times their annual base salary up to $500K. Supplemental insurance in amounts of 1x to 10x your base annual earnings can be purchased, up to $2M. For those with dependents who may need supplemental insurance I would recommend comparing the cost of supplemental insurance offered through Amazon with a couple outside providers to find the best option for you. 

Coverage is also available for purchase for spouses (up to $250k) and children (up to $20k).

Disability Insurance

Amazon provides both short-term and long-term disability coverage to full time employees free of charge. Amazon’s disability insurance covers 60% of an employee’s salary but doesn’t include RSUs or other compensation. After 180 days on Amazon’s short-term disability plan, an employee will switch to the long-term plan. Amazon’s long-term disability pay includes salary and RSUs for up to two years. 

If you want to learn more about how to optimize your benefits for your financial situation, please feel free to reach out. 

Scott Caufield, CFA, CPA