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Saving For Retirement Through Backdoor Roths

The Backdoor Roth IRA

The concept of the backdoor Roth IRA is designed for individuals who are disallowed to fund a regular Roth contribution due to their income being too high. For Roth contributions, it’s not a question of whether or not such contributions are tax deductible (which they are not). The issue is whether a contribution can be made at all, which is determined by the taxpayer’s modified adjusted gross income (MAGI). For 2024, a married couple filing jointly starts to lose the ability to fund a Roth IRA when MAGI reaches $230,000. By the time MAGI reaches $240,000, no Roth contribution is allowed. For single filers, the reduction for funding a Roth begins at MAGI of $146,000, and by the time MAGI reaches $161,000, no contribution is allowed. Finally, married couples filing separately, the reduction for funding a Roth begins at MAGI of $0 and is completely phased out when MAGI reaches $10,000.

Taxpayers with earned income can always fund a traditional IRA because it’s not limited by income. Rather, the deductibility of the traditional IRA is impacted by income, pension availability, etc.

While this process may sound underhanded and seems to skirt the tax laws, Congress has ruled these actions are legal.

Step-By-Step Process of Contributing to a Backdoor Roth

Step 1: Ensure You Don’t Have Any Other Pre-Tax IRA Accounts

Typically, a backdoor Roth will not work for taxpayers with large regular IRA accounts, such as from a previous employer’s rollover of a 401(k). Professionals are encouraged to look at the instructions for Form 8606, Nondeductible IRAs, to see how the backdoor Roth falls apart when large regular IRA accounts exist. One thought that may help to alleviate this issue is for the taxpayer to move large regular IRA assets to their employer’s 401(k), or other plan, if their employer’s plan permits reverse IRA rollovers.

Step 2: Make A Contribution to a Traditional, Non-Deductible IRA

Remember, the taxpayer’s income is too high to fund a Roth IRA. Instead, the taxpayer may establish and fund a traditional IRA and contribute up to $7,000 (the 2024 limit) or $8,000 for taxpayers age 50 or older as a non-deductible contribution. It may make sense to also establish, but not fund, a Roth IRA at the same time to make the transition seamless.

Step 3: Convert the Traditional IRA to the Roth IRA

After the deposit settles with the traditional IRA, the firm holding the account must be instructed to get the process underway to convert the traditional IRA to Roth. The sooner this is done, the better, as any earnings in the traditional IRA become taxable when converted to Roth. While contributions to Roth IRAs are limited by income, conversions are not limited by income. The conversion is then reported on Form 8606. Assuming there were no other traditional IRA assets to contend with, the conversion will be tax free.

The Mega Backdoor Roth IRA

The mega backdoor Roth uses the ability of taxpayers to make after-tax contributions to a 401(k) plan, which are treated like a traditional IRA. For this to work, the first key step is for the taxpayer to participate in an employer plan that permits after-tax contributions (not Roth 401(k) contributions, just after-tax contributions). This would also apply to Solo-401(k) taxpayers.

In order to do a mega backdoor Roth IRA, the 401(k) plan needs to offer:

  • After-tax contributions above and beyond the $23,000 (plus catch up for 50+ taxpayers) pre-tax contribution limits
  • In service distributions or non-hardship withdrawals

If the plan meets these rules, the client can max out their 401(k) with after-tax contributions up to the contribution limit each year. They can then transfer that money to a traditional IRA and do the same process as a Backdoor Roth IRA. Watch out – the maximum contribution allowed from ALL sources (the client plus their employer match) is limited to $69,000 in 2024 ($76,500 for age 50+) or 100% of compensation, whichever is lower.

The bad news is that very few employers have plans which allow both after-tax contributions and in service distributions. Taxpayers should check with their benefits manager (and not their colleague in the next cubicle) before taking this on.

Contributing to a Mega Backdoor Roth

The process for doing a mega backdoor Roth IRA conversion is very similar to a regular backdoor Roth, just substitute the after-tax 401(k) for a traditional IRA.

  • Maximize After-Tax 401(k) Contributions (assuming this is possible)
    Remember that a key here is to make after-tax 401(k) contributions and not straight-up Roth 401(k) contributions.
  • Transfer the After-Tax Portion to the Roth IRA

The employer must allow in-service non-hardship withdrawals for this to work, as mentioned before. This concept can work if the taxpayer waits until they terminate employment, but then they can run into the earnings problem as in the regular backdoor Roth where the earnings (but not the contributions) are taxable.

Alternative:  If the taxpayer’s plan allows for in-service Roth 401(k) conversions (sometimes referred to as Designated Roth accounts), the taxpayer may be able to simply contact the 401(k) provider and rollover the after-tax portion to the Roth account in the 401(k).


The backdoor Roth and mega backdoor Roth strategies may be highly beneficial for taxpayers wishing to contribute as much to their retirement as possible but earn too high of an income to do so through traditional means. Having conversations with your clients to identify their retirement goals and explore options with them and their financial advisors to achieve them in as tax-favorable a way can help your clients reach an informed decision in the tax planning process.

If you want to dive deeper into this topic, register for a May 30 webinar, IRAs and Conversions.

Originally authored by 
Tom O’Saben, EA

Updated by
Chris Korban, CPA

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Disclaimer: The information referenced in Tax School’s blog is accurate at the date of publication. You may contact if you have more up-to-date, supported information and we will create an addendum.

University of Illinois Tax School is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information. This blog and the information contained herein does not constitute tax client advice.

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