Question 1

What is a Backdoor Roth IRA?

Accepted Answer

A Backdoor Roth IRA is a legal strategy for high earners who exceed Roth IRA income limits. You contribute to a Traditional IRA (non-deductible), then convert it to a Roth IRA. The conversion is taxed on any gains above your contribution.

Question 2

Is a Backdoor Roth IRA legal?

Accepted Answer

Yes, the Backdoor Roth IRA is legal. There is no income limit on Roth conversions, only on direct Roth contributions. The IRS has never challenged this strategy, though Congress has considered closing it.

Question 3

What is the pro-rata rule?

Accepted Answer

The pro-rata rule means you cannot convert only the non-deductible portion of your Traditional IRA. All Traditional IRA balances are combined, and the taxable portion of your conversion is proportional. If you have pre-tax IRA money, some of the conversion will be taxable.

Backdoor Roth IRA Calculator

Your Details