If you earn too much to contribute to a Roth IRA directly, there's a workaround that's been around for years.
It's called the backdoor Roth IRA, and it's become a hotter topic as income limits lag behind rising salaries.
Here's how it works and what to watch out for.
For 2025, single filers phase out between $150,000 and $165,000, and married couples filing jointly phase out between $236,000 and $246,000.
Earn above that, and you can't put money into a Roth IRA directly.
But a traditional IRA has no income limit for contributions.
First, you contribute to a traditional IRA—up to the annual limit, which is $7,000 for 2025, or $8,000 if you're 50 or older.
Second, you convert that money into a Roth IRA.
Since you already paid tax on the contribution and it grew little or nothing in between, the conversion usually carries a small tax bill.
Roth accounts grow tax-free, and qualified withdrawals in retirement are tax-free too.
No required minimum distributions during your lifetime.
For high earners who expect their tax rate to stay the same or rise, that's an appealing deal.
There's a catch that trips people up: the pro-rata rule.
If you hold pre-tax money in any traditional IRA—from an old 401(k) rollover, for example—the IRS looks at all your traditional IRA balances together when calculating how much of your conversion is taxable.
That can turn a mostly tax-free conversion into a mostly taxable one.
The fix is often to move pre-tax IRA money into a workplace plan like a 401(k) before doing the conversion, assuming your plan allows it.
If it doesn't, the math may not work in your favor, and it's worth talking to a tax professional before proceeding.
Another wrinkle: the "step transaction" doctrine.
The IRS hasn't formally blessed the two-step maneuver, but it also hasn't challenged it in the years since it became common.
Most tax pros treat it as settled practice, though the paperwork still needs to be right.
That paperwork matters more than people expect.
Your traditional IRA contribution may be nondeductible, which means you need to file Form 8606 to track your basis.
Skip it, and you could pay tax twice on the same money later.
The conversion itself gets reported on Form 1099-R and Form 8606.
Some people contribute for one year and convert the next, while others do both in the same calendar year.
Either can work, but converting shortly after contributing keeps the taxable growth small.
If the market moves a lot between the two steps, you'll owe tax on the gain.
One more note: you can't undo a Roth conversion anymore.
The option to recharacterize—essentially reverse it—was eliminated by the Tax Cuts and Jobs Act starting in 2018.
For Americans watching their tax bill in retirement, the appeal is easy to see.
Tax-free growth and tax-free withdrawals are rare in the retirement world, and this route keeps the door open for people whose income pushed them past the front entrance. **Our take:** The backdoor Roth is a legitimate, widely used tool, but it isn't plug-and-play.
If you have any pre-tax IRA money sitting around, run the numbers or get help first—otherwise the tax bill can surprise you.
Final Thoughts
Done carefully, it's one of the better retirement moves available to higher earners.