The Over Talked About Back Door Roth IRA

The back door Roth IRA is one of the more talked about planning tools available to retirement savers. It is number two in our limited opinion to the Mega-Back Door Roth IRA (stayed tuned for our next blog post on why this probably isn't relevant for you). For high income earners which is those with AGI (adjusted gross income) above 168K for single filers in 2026 and 252K for joint filers in 2026, it is a way to incrementally get a little more saved on an after tax basis.

The way it works is you contribute to a non-deductible IRA at year end and then early in the new year prior to any interest or gains you convert this to a Roth IRA. In 2026 that gets you another $7,500 (or $8,600 if over 50) into your retirement accounts. It sounds very easy. That isn't always the case however.

The pro-rata rule looks at all of your IRA's. So think about any SEP, SIMPLE, traditional or rollover IRA's that you might have. If you have those, this probably isn't for you. In theory you could go through the process of a roll-in (where this money all gets rolled into your current employer plan) at which point you could pursue this approach.

One last note on the backdoor Roth IRA. We have savers ask us about this all the time and yet in most cases they aren't saving up to their full 401K limit. The reason this matters is they could easily just increase their 401K savings into the Roth 401K which does not have income limits. This is by far the easier approach!