Backdoor Roth IRA: How High Earners Can Still Contribute to a Roth

Roth IRAs are one of the most powerful retirement accounts available — tax-free growth forever, no required minimum distributions, tax-free withdrawals in retirement. But there's a catch: if your income is too high, you can't contribute directly.

For 2026, the Roth IRA contribution limit phases out at $146,000-$161,000 for single filers and $230,000-$240,000 for married filers. Above those limits, no direct Roth IRA contribution.

The backdoor Roth IRA is a two-step legal workaround that lets you make the contribution anyway.

The Strategy in Two Steps

Step 1: Make a non-deductible contribution to a Traditional IRA.

There are no income limits for contributing to a Traditional IRA — the limit only affects whether the contribution is deductible. High earners can always contribute to a Traditional IRA; they just can't deduct it from taxes.

For 2026: contribute $7,000 ($8,000 if 50+) to a Traditional IRA. No tax deduction, but the money goes in.

Step 2: Convert the Traditional IRA to a Roth IRA.

This is the "backdoor." You request a Roth conversion — the Traditional IRA balance moves to a Roth IRA. The conversion is a taxable event, but since you contributed post-tax dollars in Step 1, there's nothing new to tax.

Result: You now have $7,000 in a Roth IRA, growing tax-free. For a couple, you each do this, contributing $14,000 total.

The Pro-Rata Rule: The Catch

The backdoor Roth works cleanly only if you have no other pre-tax IRA money.

If you have any other Traditional IRA balances (rollover IRA from a previous 401(k), deductible Traditional IRA contributions from prior years), the IRS applies the "pro-rata rule" — it treats all your IRA money as one pool and determines what percentage was pre-tax vs. post-tax. You pay tax on the pre-tax percentage of your conversion.

Example: You have $93,000 in a rollover IRA and contribute $7,000 post-tax to a new Traditional IRA. Total IRA balance: $100,000. Your $7,000 contribution is 7% of the total. When you convert that $7,000, only 7% ($490) is tax-free. The remaining $6,510 is taxed as ordinary income — defeating the strategy.

The fix: If you have a pre-tax rollover IRA, roll it into your current employer's 401(k) before doing the backdoor Roth. Most 401(k) plans accept rollovers from IRAs. Once the pre-tax money is in the 401(k), you no longer have pre-tax IRA balances, and the backdoor Roth works cleanly.

Alternatively, you could convert your entire rollover IRA to Roth (paying the taxes due), which also clears the way.

SEP-IRA and SIMPLE IRA balances also count for the pro-rata rule. If you have these accounts, the same rollover strategy applies.

Step-by-Step How to Do It

Step 1: Open a Traditional IRA at Fidelity, Vanguard, or Schwab if you don't have one already.

Step 2: Contribute $7,000 (or $8,000 if 50+). Select "non-deductible" — you won't get a tax deduction, and you're recording that this is post-tax money.

Step 3: Wait — a few days to a few weeks for the money to settle. Some people immediately convert; others wait until the end of the year to make sure all contributions are settled. Either works.

Step 4: Convert the Traditional IRA to Roth. In your brokerage account, find the option for "Roth conversion" (Fidelity, Vanguard, and Schwab all make this straightforward online). Select the Traditional IRA you want to convert and the Roth IRA to receive the funds.

Important: When asked whether to withhold taxes from the conversion, say NO. Let the full amount move to the Roth. You'll owe any taxes at tax filing time, paid from other funds — not by reducing your Roth balance.

Step 5: File Form 8606 with your federal tax return. This is how you document to the IRS that the Traditional IRA contribution was non-deductible (post-tax), so you don't get taxed again on conversion. This form is critical — don't forget it.

Step 6: Invest the Roth IRA funds in your preferred index funds. The conversion typically puts the money in a money market fund — you need to invest it.

Timing Considerations

Contribute early in the year: January contribution = maximum time for tax-free growth.

Converting in the same calendar year: To minimize complexity, contribute and convert in the same year. This way your Form 8606 is simple — you contributed $7K post-tax, you converted $7K, no taxes owed.

If you earn investment income before converting: If the $7,000 earns $50 in dividends before you convert, that $50 is pre-tax income and will be taxed on conversion. To avoid this, convert quickly after contributing — "contribute then immediately convert" minimizes this.

The Mega Backdoor Roth

If you've maxed your regular backdoor Roth and want to contribute even more, some 401(k) plans allow a "mega backdoor Roth" — after-tax contributions to a 401(k) that are then rolled over to a Roth.

In 2026, the total 401(k) contribution limit (employee + employer) is $70,000. If your employee contribution ($23,500) plus employer match equals, say, $33,500, you may be able to make after-tax contributions of up to $36,500 more. If your plan allows in-service Roth conversions, you can then convert those to Roth.

This strategy requires a 401(k) plan that explicitly allows: (1) after-tax contributions and (2) in-service withdrawals or rollovers. Many large employer plans support this; smaller employer plans often don't. Check your plan documents or ask HR.

The mega backdoor Roth can allow $30,000+ per year in additional Roth-equivalent savings — a massive long-term tax advantage for high earners.

Is the Backdoor Roth Safe? (Yes)

There have been discussions in Congress about eliminating the backdoor Roth, but as of 2026, it remains legal. The IRS has issued guidance acknowledging the strategy. This is not a gray area or a loophole — it's a deliberate two-step process using explicitly allowed transactions.

Some people worry about a "step transaction doctrine" — the IRS treating the two steps as one transaction and denying the tax benefit. Most tax professionals are not concerned about this for standard backdoor Roth contributions, because both steps are independently legal and the IRS has effectively blessed the combined strategy.

The Bottom Line

If you're a high earner shut out of direct Roth IRA contributions, the backdoor Roth gives you access to $7,000 per person per year of tax-free growth. For a couple both over 50, that's $16,000/year.

Over 20 years, with 7% growth, $7,000/year compounds to about $287,000 — and all of it comes out tax-free in retirement. The backdoor Roth is one of the most valuable strategies available to high-income earners, and it takes about 30 minutes per year to execute.