Millions of Americans earn too much to contribute to a Roth IRA directly.
But there's a workaround that financial planners have quietly used for years, and it's now getting a second look as tax rules shift and more savers hunt for ways to shelter retirement money.
The maneuver is called a backdoor Roth IRA.
Here's the gist: you contribute to a traditional IRA (which has no income limits), then convert that money into a Roth.
Since you already paid taxes on the contribution, the conversion is typically tax-free, and your money grows tax-free from there.
Direct Roth contributions phase out in 2025 for single filers earning between $150,000 and $165,000, and for married couples filing jointly between $236,000 and $246,000.
High earners above those thresholds are locked out of the front door.
But the strategy has wrinkles, and one of them can sting.
If you hold other traditional IRA money, the IRS applies something called the pro-rata rule.
It looks at all your traditional, SEP, and SIMPLE IRA balances when calculating how much of your conversion is taxable.
A large pre-tax IRA balance can turn a "tax-free" conversion into a surprise tax bill.
Many savers roll existing pre-tax IRA money into a 401(k) before converting, which clears the deck so the backdoor conversion stays clean.
Not every employer plan accepts rollovers, so it pays to check first.
The annual IRA contribution limit for 2025 is $7,000, or $8,000 if you're 50 or older.
That cap applies across both traditional and Roth IRAs combined.
You also can't deduct the traditional IRA contribution if you're over the income limit and covered by a workplace plan, which is fine, because the point is the conversion, not the deduction.
Some advisors suggest waiting a bit after contributing before converting, to avoid any appearance that the money was earmarked for conversion from the start.
Either way, you'll report the conversion on Form 8606 when you file.
Congress has eyed closing the backdoor before, and proposals have surfaced in recent budget talks.
So far it has survived, but nothing guarantees it stays that way forever.
If you're considering it, treating it as a use-it-while-you-can option isn't unreasonable.
If you're in a low tax bracket now and expect higher taxes later, a Roth conversion can make sense.
If you're near retirement and facing a big tax hit on conversion, it may not.
Running the numbers with a tax pro or a fee-only planner is worth the cost. **Our take:** The backdoor Roth remains one of the few legal ways high earners can build tax-free retirement income, but it rewards people who plan ahead.
Final Thoughts
Clear out pre-tax IRA balances, keep clean records, and revisit the math each year, because the rules and your income can both change.