Backdoor Roth IRA: What It Is and Why It Matters
- Marshall Goins
- 2 days ago
- 2 min read
Wondering how to do a Backdoor Roth IRA the Right Way (without the headaches)?
The backdoor Roth IRA is not a loophole. It’s a completely legitimate, IRS-accepted strategy—when it’s done correctly.
Where people get into trouble isn’t the strategy itself. It’s how they fund it and when they make the move.
Here’s the approach we’ve found works best:
Start With an Investment Account
Because Roth IRA eligibility is based on income—and income can fluctuate—we don’t recommend contributing directly to a Roth throughout the year if you’re anywhere near the income limits. Instead, we recommend saving consistently into a taxable investment account.
For example, if you’re under age 50 and want to max out your IRA, you’d save $7,000 per person per year (this amount is just for example, this amount could change, so consult with me or your financial advisor). Break that into monthly contributions and invest regularly. This avoids the risk of accidentally contributing directly to a Roth and having to unwind it later—a process that’s messy, time-consuming, and completely avoidable.
Confirm Income at Year-End
Once the year is over, we work with the client and their tax advisor to determine whether they’re above or below the Roth income limits.
If they qualify for a direct Roth contribution—great.If not, that’s where the backdoor Roth process begins.
Step 1: Make a Non-Deductible Traditional IRA Contribution
Before the tax deadline (April 15), money moves from the investment account into a Traditional IRA as a non-deductible contribution.
This designation matters.
Normally, Traditional IRA contributions reduce taxable income. In this case, they don’t. The IRS is explicitly told this contribution is non-deductible, which keeps everything clean and compliant.
Step 2: Convert Immediately to a Roth IRA
Once the money hits the Traditional IRA, it’s converted to a Roth—ideally right away.
Why the rush? Because converting immediately avoids investment gains inside the Traditional IRA, which means no unexpected taxes on growth.
Day one: contribute.
Day two: convert.
Simple. Clean. Effective.
Why This Works
This method gives you flexibility throughout the year, avoids income-limit surprises, and allows you to take full advantage of Roth benefits—tax-free growth, tax-free withdrawals, and no required minimum distributions.
It’s not something you guess at. It’s something you execute intentionally, in coordination with your advisor and tax professional.
The Bottom Line
A backdoor Roth IRA can be a powerful wealth-building move—but only when it’s done with discipline and precision.
Save first. Confirm income later. Contribute non-deductible. Convert immediately.
That’s the process we’ve refined over years of doing this the right way.
Want to know more about Backdoor Roths or other money management strategies? Reach out to us today!
Comments