Backdoor Roth Method: Is It Right For Me?

Apr 24, 2025

Published: April 25, 2025 | 5 min read

If you're making too much money to contribute to a Roth IRA, congratulations—and welcome to the club that still needs to play by the tax rules.

If your income is too high to directly contribute to a Roth IRA, the Backdoor Roth IRA is your legal cheat code. Most high earners leave money on the table because they don’t know this move exists—or they’re afraid of doing it wrong.

Let’s break it down. No jargon. No fluff. Just the facts.

🚪 What Is a Backdoor Roth IRA?

A Backdoor Roth IRA is a workaround for people who earn too much to contribute directly to a Roth IRA.

Here’s how it works:

You put money into a Traditional IRA (nondeductible).
Then you convert it into a Roth IRA.

That’s it. You’ve legally funneled money into a Roth—even if your income is above the IRS limit.

💡 2025 Income Limits (Direct Roth IRA Contributions)

Single: Phased out starting at $150,000 → cut off at $165,000
Married filing jointly: Starts at $236,000 → cut off at $246,000
Married filing separately: $0 phase-in → $10,000 cap

If you're over these limits? Backdoor is your move.

🧠 Why High Earners Should Care

Roth IRAs are beasts:

Tax-free growth
Tax-free withdrawals in retirement (if rules are met)
No RMDs (Required Minimum Distributions)

You don’t get a tax deduction now—but you keep more money later. And that’s where real wealth is built.

🛠️ How to Execute a Backdoor Roth IRA (Step-by-Step)

Here’s how to do it without triggering taxes or headaches:

Step 1: Open a Traditional IRA

Choose your brokerage (Fidelity, Schwab, Vanguard—you pick).

Step 2: Contribute Post-Tax Dollars

Put in up to $7,000 (or $8,000 if you're 50+). Make sure it’s a nondeductible contribution.

⚠️ No earned income? You can still contribute through a spousal IRA if your partner has income.

Step 3: Convert to Roth IRA Immediately

Don’t wait. If that money earns even a penny of interest, you could owe taxes. Convert it before investing.

Step 4: File IRS Form 8606

This tells the IRS that your contribution was after-tax, so they don’t tax it again. Skip this form, and the IRS might treat your whole conversion as taxable. Don’t skip it.

🔍 The Pro-Rata Rule (Read This Twice)

If you already have money in any Traditional, SEP, or SIMPLE IRA, the IRS sees them all as one big bucket.

Example:

You have $15,000 in an old Traditional IRA (pre-tax).
You contribute $5,000 post-tax to a new IRA and convert it.
IRS says: 25% of that conversion came from pre-tax money → $1,250 is taxable.

If this is you, talk to a tax pro before doing the backdoor move. Or you could get a surprise bill.

⚖️ Pros & Cons of the Backdoor Roth IRA

✅ Pros:

Circumvents income limits
Tax-free growth & withdrawals
No RMDs
Ideal for tax diversification in retirement

⚠️ Cons:

Can trigger tax bills if you mess it up
Requires Form 8606
Not ideal if you have existing pre-tax IRAs

📈 Who Should Use a Backdoor Roth IRA?

✅ You earn too much for direct Roth contributions
✅ You’ve maxed out your 401(k)
✅ You don’t have large existing pre-tax IRA balances
✅ You want to build long-term, tax-free wealth

🛑 When to Avoid It

You qualify for direct Roth contributions—just do that
You have large pre-tax IRA balances and don’t want a surprise tax hit
You’re not comfortable filing Form 8606 (again, hire help)

Also, if your employer offers a Roth 401(k), you might be able to put in up to $23,500 (2025 limit) without using the backdoor at all.

📚 Real-World Example

Let’s say you’re 40, single, and made $190K in 2024:

You open a Traditional IRA before April 15, 2025
You contribute $7,000 (non-deductible)
You immediately convert it to a Roth IRA
You fill out Form 8606 when you file your taxes

Boom. You just got money into a Roth without breaking the rules.

🧾 The Bottom Line

The Backdoor Roth IRA isn’t shady. It’s IRS-approved. It’s legal. And it’s powerful—if you do it right.

If you’re a high earner trying to protect your retirement from future tax hikes, this is one of the smartest moves on the table.

Just follow the steps. Avoid the pro-rata trap. And file your forms.

✅ Sign up for my Beginner Investing Master Class

✅ Take advantage of my FREE Financial Freedom Faster eBook

✅ Get in touch

Play the long game. Don’t let the tax code win.

– Steve

Disclaimer:

The following article is strictly the opinion of the author and is not to be considered financial/investment advice. CTL Community LLC and the author of this article do not claim to be a registered financial advisor (RIA) or financial advisor. Please visit our terms of service and privacy policy before reading this article. "Call to Leap may earn affiliate commissions from the links mentioned. Call to Leap is part of an affiliate network and receives compensation for sending traffic to partner sites such as ImpactRadius, CardRatings, MyBankTracker, and more."