The Backdoor Roth IRA: A Legal Workaround for High Earners

September 10, 2026

The Backdoor Roth IRA: A Legal Workaround for High Earners

Roth IRAs are one of the most valuable tools in retirement planning, tax-free growth, tax-free withdrawals, and no required minimum distributions during your lifetime. The catch is that once your income crosses a certain threshold, the IRS won't let you contribute directly. That's where the Backdoor Roth IRA comes in: a well-established, entirely legal two-step process that lets high earners get money into a Roth IRA regardless of their income.

Why a "Backdoor" Is Needed

Direct Roth IRA contributions phase out at higher incomes. For 2026, the phase-out range is $153,000 to $168,000 for single filers and $242,000 to $252,000 for married couples filing jointly. Once your modified adjusted gross income (MAGI) is at or above the top of that range, you can't contribute to a Roth IRA directly.

There's no such income limit, however, on making a nondeductible contribution to a Traditional IRA, or on converting a Traditional IRA to a Roth IRA. The Backdoor Roth simply uses both of those facts together.

How It Works, Step by Step

Contribute after-tax dollars to a Traditional IRA. For 2026, that's up to $7,500, or $8,600 if you're 50 or older. Since your income is too high to deduct the contribution, it goes in as after-tax, nondeductible money.

File Form 8606 with your tax return to report the nondeductible contribution. This establishes your basis, the amount you already paid tax on, so you aren't taxed on it again later.

Convert the Traditional IRA to a Roth IRA, ideally soon after contributing. The shorter the gap, the less time the money has to earn interest or gains, which would be taxable at conversion.

Pay tax on any earnings that accrued between the contribution and the conversion. If you convert quickly, this is often minimal or zero.

Repeat annually if you want to keep building Roth savings this way; there's no rule against doing this every year.

The Pro-Rata Rule: The Part Most People Miss

This is where the strategy gets complicated, and where most costly mistakes happen. If you hold any other pre-tax IRA money, in a Traditional IRA, SEP IRA, or SIMPLE IRA, the IRS treats all of your IRAs as one combined pool for tax purposes when you convert.

That means you can't cherry-pick just your nondeductible contribution to convert tax-free. Instead, the conversion is taxed proportionally, based on the ratio of pre-tax to after-tax dollars across all your IRA balances. Someone with a large pre-tax rollover IRA sitting alongside a small nondeductible contribution could end up owing tax on the bulk of their "backdoor" conversion, defeating much of the purpose.

A common workaround, if your employer's 401(k) plan accepts incoming rollovers, is to roll your existing pre-tax IRA balances into the 401(k) before doing the backdoor conversion. That removes the pre-tax money from the pro-rata calculation, since 401(k) balances aren't counted alongside IRAs for this purpose.

Backdoor Roth vs. Direct Roth Contribution

Feature	Direct Roth IRA Contribution	Backdoor Roth IRA
Who can use it	Only those under the Roth income limits	Anyone, regardless of income — there's no income limit on nondeductible contributions or conversions
2026 income limits	Phases out $153,000–$168,000 (single); $242,000–$252,000 (married filing jointly)	None — that's the entire point of the strategy
2026 contribution room	$7,500 ($8,600 if 50+)	Same $7,500 ($8,600 if 50+), contributed to a Traditional IRA first, then converted
Steps involved	One: contribute directly to a Roth IRA	Two: contribute after-tax to a Traditional IRA, then convert to Roth
Main risk	Excess contribution penalty if you're over the limit and contribute directly anyway	The pro-rata rule, if you hold other pre-tax IRA balances

Who Should Consider This?

High earners whose income is above the Roth IRA phase-out range and who want tax-free growth alongside their other retirement accounts.

Anyone without significant pre-tax IRA balances, which keeps the pro-rata rule from being a concern in the first place.

Savers who've maxed out their 401(k) and are looking for another tax-advantaged place to put money before considering taxable brokerage accounts.

This strategy is generally not worth pursuing if you have large pre-tax IRA balances you can't or don't want to move into an employer plan, since the pro-rata rule can significantly reduce the tax benefit. It's also unnecessary if your income already qualifies you for direct Roth contributions.

Our Take at Merited Wealth

The Backdoor Roth IRA is a well-established, IRS-acknowledged strategy, but it isn't a "set it and forget it" move. The mechanics are simple: contribute, convert, repeat. The diligence is what matters, confirming you don't have other pre-tax IRA balances that would trigger the pro-rata rule, filing Form 8606 correctly each year, and converting promptly to minimize taxable earnings.

If you're above the Roth income limits and haven't explored this, or if you've done a backdoor contribution before but aren't certain your other IRA balances are structured correctly, that's worth a conversation before your next contribution.

Questions? We're Here to Help

Navigating retirement benefits can raise a lot of questions, and you don't have to figure it out alone. Merited Wealth has a dedicated benefits team ready to help you understand your options and make the choices that are right for you. Visit www.MeritedBenefits.com to learn more or to get started, reach out to RetirementPlans@MeritedBenefits.com. For anything else, email us at info@meritedwealth.com.