Backdoor Roth explained

You can only contribute directly to a Roth IRA if your income is below certain limits (~$150k single, ~$236k married in 2025). But there's no income limit on converting money from a Traditional IRA to a Roth IRA. The 'backdoor Roth' exploits that gap: contribute to a Traditional IRA with after-tax dollars, then immediately convert it to Roth. Legal, explicit in the tax code, and endorsed by Congress in 2018.

The steps

1. Open a Traditional IRA and a Roth IRA at the same brokerage (if you don't already have them).
2. Contribute the annual max to the Traditional IRA with after-tax money. Do NOT deduct the contribution on your taxes.
3. Wait for the funds to clear — usually a day or two.
4. Convert the entire Traditional IRA balance to the Roth IRA. No tax is owed on the conversion because the contribution was after-tax.
5. Report the contribution and conversion on IRS Form 8606 at tax time.

The mega backdoor Roth

A related but more powerful strategy. Some 401(k) plans allow after-tax (non-Roth) contributions beyond the regular limit, plus in-service conversions to Roth. This can move up to $40k+/year into Roth-status money. Requires a specific plan feature — not all 401ks have it. If yours does, and you can afford it, it's extraordinarily powerful.