Backdoor Roth Conversion

Retirement

The Backdoor Roth Conversion strategy enables high earners who exceed Roth IRA income limits to fund a Roth IRA indirectly. Process: (1) contribute $7,000 to a non-deductible Traditional IRA, (2) immediately convert it to Roth IRA. No income limit on conversions makes this possible. Pro-rata rule complication: if you have existing pre-tax Traditional IRA balances, conversions are taxed proportionally. Solution: roll existing IRAs into your 401(k) first to clear the way for clean Backdoor Roth. Report on Form 8606. Annual ritual for many high-income households. Mega Backdoor Roth (separate concept) handles much larger amounts via 401(k).