EPISODE · Jun 10, 2026 · 20 MIN
Step By Step Series: How to Open a Backdoor Roth IRA Even If You Earn Too Much | Episode 19
from What The Wealthy Do · host What The Wealthy Do
If you earn too much to contribute directly to a Roth IRA, the wealthy found a completely legal way around that. It is called the backdoor Roth IRA. And today Stephanie Dorsey walks you through every single step.This is Episode 19 of What the Wealthy Do, part of the How Does This Actually Work series breaking down the exact mechanics of wealth building strategies so you can actually execute them.A backdoor Roth IRA works because Congress removed the income limits on Roth conversions in 2010 while keeping the limits on direct contributions. That created a loophole: contribute to a traditional IRA, immediately convert it to a Roth IRA, and pay zero taxes if you do it right. The IRS knows about it. It is completely legal.This episode covers every step from opening your accounts to contributing, converting within one to two days, investing the cash in your Roth, and filing Form 8606 with your taxes. Stephanie also breaks down the pro rata rule, the number one thing that trips people up, and exactly how to deal with old traditional IRA money before you do your first backdoor conversion.Join the next Sovereign Collective cohort: joinsovereign.coBrowse all What the Wealthy Do episodes: https://docs.google.com/spreadsheets/d/1TaUUVivqfjSckA1oyhbjNRlbY_m0DMPLWbfH-eoHnDY/edit?usp=sharingBACKDOOR ROTH IRA QUICK START CHECKLISTStep 1: Open accounts if you do not have them- Open a traditional IRA- Open a Roth IRA- Use the same brokerage (Fidelity, Vanguard, or Schwab)Step 2: Clear out any existing traditional IRAs- Roll old traditional IRAs into your 401k to avoid the pro-rata ruleStep 3: Contribute to your traditional IRA- Transfer $7,000 (or $8,000 if 50 or older) to your traditional IRA- Keep it in cash, do not invest it yetStep 4: Convert to Roth IRA (1 to 2 days later)- Log into your brokerage- Convert the entire traditional IRA balance to your Roth IRAStep 5: Invest your Roth IRA- Buy index funds or target date fundsStep 6: File Form 8606 with your taxes- Use tax software or work with a CPAStep 7: Repeat every JanuaryThis podcast provides financial education and not financial advice.
What this episode covers
If you earn too much to contribute directly to a Roth IRA, the wealthy found a completely legal way around that. It is called the backdoor Roth IRA. And today Stephanie Dorsey walks you through every single step.This is Episode 19 of What the Wealthy Do, part of the How Does This Actually Work series breaking down the exact mechanics of wealth building strategies so you can actually execute them.A backdoor Roth IRA works because Congress removed the income limits on Roth conversions in 2010 while keeping the limits on direct contributions. That created a loophole: contribute to a traditional IRA, immediately convert it to a Roth IRA, and pay zero taxes if you do it right. The IRS knows about it. It is completely legal.This episode covers every step from opening your accounts to contributing, converting within one to two days, investing the cash in your Roth, and filing Form 8606 with your taxes. Stephanie also breaks down the pro rata rule, the number one thing that trips people up, and exactly how to deal with old traditional IRA money before you do your first backdoor conversion.Join the next Sovereign Collective cohort: joinsovereign.coBrowse all What the Wealthy Do episodes: https://docs.google.com/spreadsheets/d/1TaUUVivqfjSckA1oyhbjNRlbY_m0DMPLWbfH-eoHnDY/edit?usp=sharingBACKDOOR ROTH IRA QUICK START CHECKLISTStep 1: Open accounts if you do not have them- Open a traditional IRA- Open a Roth IRA- Use the same brokerage (Fidelity, Vanguard, or Schwab)Step 2: Clear out any existing traditional IRAs- Roll old traditional IRAs into your 401k to avoid the pro-rata ruleStep 3: Contribute to your traditional IRA- Transfer $7,000 (or $8,000 if 50 or older) to your traditional IRA- Keep it in cash, do not invest it yetStep 4: Convert to Roth IRA (1 to 2 days later)- Log into your brokerage- Convert the entire traditional IRA balance to your Roth IRAStep 5: Invest your Roth IRA- Buy index funds or target date fundsStep 6: File Form 8606 with your taxes- Use tax software or work with a CPAStep 7: Repeat every JanuaryThis podcast provides financial education and not financial advice.
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Step By Step Series: How to Open a Backdoor Roth IRA Even If You Earn Too Much | Episode 19
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