The Pro-Rata Rule Explained: Backdoor Roth With Pre-Tax IRAs

Listener Adam recently got a raise that pushed him above the Roth IRA income limit and now wants to know how to keep contributing via the backdoor Roth strategy. There is one complication: he already has money sitting in a traditional IRA that has never been taxed. That is where the pro-rata rule comes in, and it matters a lot. In this episode, Ryan uses a glass-of-water analogy to explain how the IRS treats co-mingled pre-tax and after-tax IRA funds.The pro-rata rule means you cannot simply convert just the new after-tax contribution. The IRS looks at all your IRA money together and taxes a proportional slice of every conversion. Ryan walks through a clean path to resolve this before attempting the backdoor strategy. This is education, not personal advice; consult a tax professional before making IRA conversions.Find "Your Fiscal Physical" the book on AmazonIf you have suggestions or feedback, please email us at: [email protected], as always, Stay the Course!