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A legal workaround that lets high earners contribute to a Roth IRA despite income limits.
Why It Matters
Roth IRAs have income limits (~$160k single, ~$240k married in 2024) - earn more and you can't contribute directly. The backdoor Roth bypasses this: contribute to a traditional IRA (no income limit), then immediately convert to Roth. It's 100% legal and used by millions of high earners. Just watch out for the pro-rata rule if you have other IRA money.
Key Points
- Step 1: Contribute to traditional IRA (non-deductible)
- Step 2: Convert to Roth IRA (pay tax on any gains)
- Pro-rata rule: If you have pre-tax IRA money, part of conversion is taxable
Related Terms
Common Questions
A legal workaround that lets high earners contribute to a Roth IRA despite income limits. Roth IRAs have income limits (~$160k single, ~$240k married in 2024) - earn more and you can't contribute directly. The backdoor Roth bypasses this: contribute to a traditional IRA (no income limit), then immediately convert to Roth.
Roth IRAs have income limits (~$160k single, ~$240k married in 2024) - earn more and you can't contribute directly. The backdoor Roth bypasses this: contribute to a traditional IRA (no income limit), then immediately convert to Roth. It's 100% legal and used by millions of high earners. Just watch out for the pro-rata rule if you have other IRA money.
Step 1: Contribute to traditional IRA (non-deductible)
Step 2: Convert to Roth IRA (pay tax on any gains)
Pro-rata rule: If you have pre-tax IRA money, part of conversion is taxable