What is a backdoor Roth IRA?
Updated: Mar 27, 2022
For those who earn over the income limits, a backdoor Roth IRA is a way to contribute still.
Sections:
+ What is a backdoor Roth IRA?
+ Who can do a backdoor Roth IRA?
+ How do you do a backdoor Roth IRA?
What is a backdoor Roth IRA?
A backdoor Roth IRA is another way to contribute to your Roth IRA if you are above the income limits. This is completely legal as of January 2022 (there was legislation proposed to get rid of this workaround, however, it did not pass).
A Roth IRA is a very attractive account because you put in post-tax dollars into the account and future earnings are tax-free. Because this is such a huge benefit, there are limits to who can contribute to a Roth IRA. For more information about Roth IRAs, check out the post where we compare Roth IRAs vs Roth 401Ks vs 401Ks.
Who can do a backdoor Roth IRA?
The only people who should engage in a backdoor Roth IRA are anyone above the income limits for contributing. As of 2022, contributions start being reduced or "phased out" starting at $129,000 for an ind