Backdoor Roth IRA: How to Contribute Even If You Earn Too Much

When your income is too high to contribute directly to a Backdoor Roth IRA, a legal strategy that lets high-income earners bypass Roth IRA income limits by converting a traditional IRA. Also known as Roth conversion ladder, it’s not a loophole—it’s a rule written into the tax code that millions use to save thousands in taxes over time. The IRS sets income limits for Roth IRAs: if you earn over $153,000 (single) or $246,000 (married) in 2025, you can’t put money in directly. But there’s no limit on converting money from a traditional IRA to a Roth IRA. That’s the gap the Backdoor Roth IRA fills.

Here’s how it works: you open a traditional IRA (even if you don’t deduct the contribution), then quickly move that money into a Roth IRA. The trick? Do it before the money earns any interest. If you’ve got other pre-tax IRA balances, things get messy fast. The IRS looks at all your IRAs together when calculating taxes on the conversion. That’s why people with old 401(k)s or existing traditional IRAs need to plan ahead. A traditional IRA, a tax-deferred retirement account where contributions may be deductible and growth is taxed later isn’t the same as a Roth IRA, a retirement account funded with after-tax dollars that lets withdrawals grow tax-free. Mixing them without understanding the pro-rata rule can cost you thousands in unexpected taxes.

This isn’t just for Wall Street elites. Teachers, doctors, software engineers, and small business owners with high incomes use this strategy every year. It’s the only way for them to get the tax-free growth and no required minimum distributions that make Roth IRAs so powerful. You won’t find it in most brokerages’ marketing materials—it’s buried in fine print. But if you’re earning over $150k and want to build wealth without paying taxes later, this is your secret weapon.

Some people think you need to do this every year. You don’t. Once you’ve got the account set up, you can let it grow. Others worry about paperwork. Yes, you’ll need to file Form 8606, but your tax software will walk you through it. The real risk? Waiting too long. The earlier you start, the more time your money has to grow tax-free. And if you’re already maxing out your 401(k), this is the next best thing.

Below, you’ll find real breakdowns of how this works in practice—what fees to watch for, how to avoid the pro-rata trap, when to do the conversion, and what happens if you mess up. No theory. No fluff. Just what you need to do it right.