What is a Backdoor Roth IRA? | Backdoor Roth IRAs Explained
Learn all about Backdoor Roth IRAs, how they work, and their contribution limits in this video explainer from Titan's Emily Bice.
A backdoor Roth conversion occurs when one transfers a balance from a traditional IRA into a Roth IRA. These conversions are common for individuals whose income exceeds the IRS income limits to contribute into a Roth IRA. There are many reasons for doing a Roth conversion. Many look to take advantage of tax free growth and withdrawals in retirement. Additionally, Roth conversions offer the ability to lower taxable income in retirement. Brokerages and investment firms that offer both traditional and Roth IRAs provide assistance in pulling off a backdoor conversion. It's important to note that this is not a means of dodging taxes, nor is it backdoor Roth conversion a special type of retirement account.
In the simplest terms it's a way to get around the income limits that normally prevent high earners from owning Roth IRAs. Fun fact, the backdoor Roth IRA gained popularity in 2010 when Congress lifted the $100,000 income limit that had previously been in place for IRA conversions. It was called into question in 2021, but as it now remains in place.