How a Backdoor Roth IRA Works (and Who Should Use One)

A backdoor Roth IRA is a legal strategy for high earners who make too much to contribute to a Roth IRA directly. Once your income rises above the IRS phase-out limits, you can no longer contribute to a Roth IRA directly. The backdoor approach involves contributing to a traditional IRA first, then converting it to Roth, which has no income limit on conversions.Ryan explains the pro-rata rule, the main gotcha that can trip up the strategy if you already have pre-tax IRA money sitting around. He also covers why this is completely legal and ethical, and shares the famous story of a multi-billion-dollar Roth IRA held by a PayPal founder. This is education, not personal advice; talk to a tax professional before attempting a backdoor Roth.Find "Your Fiscal Physical" the book on AmazonIf you have suggestions or feedback, please email us at: [email protected], as always, Stay the Course!