What Is a Backdoor Roth IRA?
I'm here to explain the backdoor Roth IRA, a legal strategy that lets you as a high-income earner bypass the income limits on direct Roth IRA contributions. You do this by making a nondeductible contribution to a traditional IRA and then converting it to a Roth IRA.
This approach allows you to enjoy the perks of a Roth IRA, like tax-free growth and tax-free withdrawals of earnings once you're at least 59½ and the account is five years old, plus penalty-free access to contributions anytime. For 2025, the maximum contribution is $7,000, or $8,000 if you're 50 or older, same as in 2024.
Without this backdoor method, your modified adjusted gross income (MAGI) would limit or block direct contributions. For 2025, limits start at $236,000 for married filing jointly, $0 for married filing separately, or $150,000 for single or head of household, phasing out completely at $246,000, $10,000, or $165,000 respectively. In 2024, those thresholds were $230,000 to $240,000 for joint, $0 to $10,000 for separate, and $146,000 to $161,000 for others.
Key Takeaways
If you're a high-income earner, you can't contribute directly to a Roth IRA, but the backdoor strategy lets you do it indirectly. You make a nondeductible traditional IRA contribution and convert it right away to Roth.
Watch out for the pro-rata rule, which could hit you with taxes if you have other non-Roth IRAs. Remember, Roth contributions are post-tax, grow tax-free, and can be withdrawn tax-free under the rules. This is similar to the mega-backdoor Roth, but that uses a 401(k) for larger amounts.
How a Backdoor Roth IRA Works
Let me walk you through how this works in four parts. First, open a traditional IRA at your preferred brokerage.
The Four-Part Process
- Make a post-tax, nondeductible contribution to the traditional IRA, up to $7,000 or $8,000 based on age, limited by your earned income or your spouse's if needed.
- Convert the traditional IRA to a Roth IRA immediately, before investing, to avoid taxes on any earnings.
- File Form 8606 with your taxes to report the nondeductible contribution and prevent the IRS from taxing the conversion.
Continuing the Process
You can do the first three steps anytime before your tax return deadline, usually April 15 of the next year, and repeat it annually. The contribution is post-tax, so if done right, you won't owe extra taxes now, and future withdrawals can be tax-free if you follow Roth rules.
Trouble arises with the pro-rata rule if you have existing traditional IRA funds. For example, if you have $15,000 pre-tax in one IRA and add $5,000 nondeductible to convert, the IRS sees 75% as taxable, so you'd owe on $3,750 of the conversion based on your tax rate.
Advantages and Disadvantages of a Backdoor Roth IRA
This is a straightforward way to build your Roth savings. Anyone with earned income can do it, unlike a Roth 401(k) which depends on your employer, and it keeps future taxes low, which helps with Social Security or Medicare costs.
On the downside, it can feel cumbersome at first, and mistakes lead to irreversible taxes. If you have non-Roth IRAs, the pro-rata rule might create a big tax bill.
Why Use a Backdoor Roth IRA?
You'd use this if your income blocks direct Roth contributions. It's simple once you avoid pitfalls like the pro-rata rule. Alternatively, if your job offers a Roth 401(k), you can contribute up to $23,500 in 2025 or $23,000 in 2024, plus catch-ups.
Skip it if you can contribute directly or if you have existing non-Roth IRAs—consult a tax advisor then.
Example of a Backdoor Roth IRA
Suppose you're single with $180,000 MAGI in 2025. You can't contribute directly, and you've maxed your Roth 401(k). On March 15, 2026, open a traditional IRA, contribute $7,000 nondeductible, convert it immediately to Roth, invest, and file Form 8606. Wait 30 days between steps if you want clear records, as some experts suggest.
The Bottom Line
The backdoor Roth IRA lets high earners like you access tax-free growth and withdrawals by carefully following the steps. Done right, it builds your retirement savings without extra taxes.
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