Guide
The Backdoor Roth IRA, Explained
How high earners legally contribute to a Roth IRA even above the income limits.
Roth IRAs have income limits - above a certain MAGI you can't contribute directly. The backdoor Roth is a legal two-step workaround.
The two steps
- Contribute to a Traditional IRA (which has no income limit on contributions, just on deductibility).
- Convert that Traditional IRA to a Roth IRA shortly after.
Watch the pro-rata rule
If you hold other pre-tax IRA money, the IRS taxes conversions proportionally - you can't just convert the after-tax portion. Many people first roll existing pre-tax IRAs into a 401(k) to clear the way.
Done cleanly, the conversion of a fresh non-deductible contribution generates little or no tax. Always confirm the details with a tax professional - mistakes here are common.
Put it into numbers: estimate the tax on a conversion.