The has income limits. But there's a legal loophole that lets high earners contribute anyway. It's called the "Backdoor Roth."
The Problem
2024 Roth IRA Income Limits:
- Single: $161,000+ = no direct contributions
- Married: $240,000+ = no direct contributions
If you make too much, you can't contribute directly to a Roth IRA. But you CAN do it through the back door.
How the Backdoor Roth Works
- Contribute to a (no income limit for contributions)
- Convert it to a Roth IRA (no income limit for conversions)
- Pay taxes on any gains (usually minimal if done quickly)
That's it. Completely legal, IRS-approved.
Pro Tip
The key is to convert quickly—ideally within days—so there are minimal or no gains to pay taxes on.
Step-by-Step Process
Step 1: Open Both IRAs
You need a Traditional IRA and a Roth IRA at the same brokerage.
Step 2: Contribute to Traditional IRA
- 2024 limit: $7,000 ($8,000 if 50+)
- Make a non- contribution (you won't get a tax break)
Step 3: Wait a Few Days
Some people convert immediately; others wait 1-2 business days. Either works.
Step 4: Convert to Roth
Call your brokerage or do it online. Request a "Roth conversion" of your Traditional IRA balance.
Step 5: Report on Taxes
File Form 8606 with your tax return to document the non-deductible contribution.
The Pro-Rata Rule (Important!)
Watch Out
If you have OTHER Traditional IRA money, the conversion gets complicated.
The IRS treats ALL your Traditional IRA money as one pool. If you have:
- $7,000 new non-deductible contribution
- $63,000 in an old Traditional IRA (pre-tax)
Then 90% of your conversion is taxable. You can't just convert "only the new money."
Solutions:
- Roll old Traditional IRA into your 401k first (if allowed)
- Convert everything to Roth (pay the taxes)
- Accept the partial taxation
The Mega Backdoor Roth
If your 401k allows after-tax contributions AND in-plan Roth conversions, you can contribute up to $69,000 total (2024) and convert the after-tax portion to Roth.
Regular 401k limit: $23,000 After-tax + conversion: Up to $46,000 more Total possible Roth savings: $69,000/year
"I've done the mega backdoor for 5 years. That's an extra $200,000+ in my Roth accounts, growing tax-free forever. Worth the paperwork."
Not all 401k plans allow this—check with your HR.
Common Mistakes
Avoid This
- Forgetting to file Form 8606
- Leaving money in Traditional IRA too long (gains are taxable)
- Not checking pro-rata rule before converting
- Missing the annual contribution deadline
- Forgetting about state taxes on conversions
Is It Worth It?
| Situation | Verdict |
|---|---|
| High earner, no old Traditional IRA | Absolutely do it |
| Have old Traditional IRA money | Consider rolling to 401k first |
| Close to Roth income limits | May not be necessary |
| Young, high income | Maximum benefit—do it every year |
Quick Win
If you earn above the Roth limits, call your brokerage and ask them to walk you through a backdoor Roth. Many have streamlined the process.