Planning · Retirement
The Backdoor Roth IRA
A perfectly legal two-step move that lets high earners fund a Roth IRA even when their income is well over the direct-contribution limit.
Why it exists
Roth IRAs have an income limit — earn too much and you can't contribute directly. Traditional IRAs have no income limit on contributions (only on the deduction), and there is no income limit on Roth conversions. Combine those two facts and you get the backdoor Roth: contribute to a Traditional IRA, then convert it to a Roth.
The two steps
Step 01
Non-deductible Traditional IRA contribution
Put up to the annual IRA limit ($7,500 in 2026, or $8,600 if you're 50+) into a Traditional IRA with after-tax dollars. Because you're over the deduction limit, you check the box that says the contribution is non-deductible. Your cost basis in the IRA goes up by the amount contributed.
Step 02
Convert to Roth IRA
Soon after — often the same week — convert the Traditional IRA balance to a Roth IRA. Since the contribution was after-tax and little or no growth has happened yet, the conversion is tax-free or nearly so. The money now grows tax-free in the Roth, forever.
The catch
The pro-rata rule
The IRS treats all of your Traditional, SEP, and SIMPLE IRAs as a single pool when you convert. You can't cherry-pick the after-tax dollars; the conversion is taxed on a pro-rata basis using the ratio of after-tax basis to total IRA balance.
Example
You have $93,000 of pre-tax money sitting in a rollover IRA from an old 401(k). You make a $7,000 non-deductible contribution and try to convert it. Total pool = $100,000, of which only 7% is after-tax. Converting $7,000 means $6,510 (93%) is taxable as ordinary income, and only $490 comes out tax-free.
Roth IRAs and workplace 401(k) balances are not in the pool. A common workaround is to roll any pre-tax IRA balances into a current 401(k) before doing the backdoor — leaving the IRA pool empty so the conversion is fully tax-free.
Who actually needs this
| Filing status | Direct Roth phases out above (2026 MAGI) |
|---|---|
| Single / Head of household | $168,000 |
| Married filing jointly | $252,000 |
| Married filing separately | $10,000 |
If your MAGI is below the phase-out, just contribute to a Roth directly — no backdoor needed. The backdoor is for people whose income locks them out of the front door.
Practical checklist
- 01Confirm your Traditional / SEP / SIMPLE IRA balances are $0 at year-end — or accept the pro-rata math.
- 02Make the non-deductible contribution to a Traditional IRA.
- 03Convert to Roth — usually a one-click action labeled "Convert to Roth IRA."
- 04File Form 8606 with your tax return to report the non-deductible contribution and the conversion. Skipping it is the most common backdoor Roth mistake.
- 05Invest the Roth balance — the conversion alone doesn't put the money to work.
Bonus
The "Mega Backdoor" Roth
A different move that lives inside your 401(k): if your plan allows after-tax (non-Roth) contributions and in-plan Roth conversions (or in-service withdrawals to a Roth IRA), you can stuff tens of thousands of extra dollars into Roth each year — up to the total $72,000 combined 401(k) limit for 2026, minus what you and your employer already contributed. Not every plan supports it; check with HR.
Educational only — not tax or investment advice. Tax law changes; confirm current rules with a qualified advisor before acting.