How the Backdoor Roth IRA Works in 2026

Lucas and Luna break down the Backdoor Roth IRA strategy for 2026, using a concrete example: a high-income earner named Jen who earns $180,000 and is phased out of direct Roth IRA contributions. They walk through the two-step process—making a nondeductible traditional IRA contribution and converting it to Roth—and explain the pro-rata rule that can trigger unexpected taxes if you have existing pre-tax IRA balances. Lucas flags the key risk: if Jen has a $50,000 rollover IRA from an old 401(k), only 20 percent of her conversion would be tax-free. They discuss strategies to avoid the pro-rata trap, including rolling pre-tax IRA funds into a current 401(k) if the plan allows. The episode also covers the Mega Backdoor Roth for those with access to after-tax 401(k) contributions, and notes pending legislation that could eliminate the Backdoor Roth entirely. No prior episode has covered Roth conversion strategies at this level of specificity. #BackdoorRothIRA #RothIRA #RothConversion #ProRataRule #IRAStrategy #RetirementPlanning #TaxStrategy #HighIncome #TraditionalIRA #401k #MegaBackdoorRoth #AfterTaxContributions #TaxFreeGrowth #FinancialPlanning #Finance #FexingoBusiness #BusinessPodcast #TaxPodcast Keep every episode free: buymeacoffee.com/fexingo