Flow FP's Block Woman is hit by some tax code changes.

If I had to wager, backdoor Roth IRA contributions are in the top three of #personalfinance Slack channel topics.

Which is kinda funny considering that the $7500 [updated for 2026] involved is a relatively small amount of money for many people working in tech. It’s definitely in the “icing on the cake, not the cake itself” category.

You’ve probably heard of backdoor Roth IRA contributions. You might even feel like you’re missing out because your Inside Voice is always uncomfortably whispering, “Yes, but uh…what are they? Should I be doing it? And if I should be, how do I actually do it?”

Excellent questions, all. Shall we?

What Is a Backdoor Roth IRA Contribution?

Let’s start with understanding what Individual Retirement Accounts (IRAs) are and how they differ by tax treatment. There are two kinds:

Traditional:

  • You can always contribute to a traditional IRA (assuming you have earned some income). The 2026 contribution limit is $7.5k, if you’re under 50 years old.
  • Whether or not you can take a tax deduction in this current year depends on your income level and whether you have an employer retirement plan. If you’re like our clients, you can’t take a deduction. You make too much money.
  • When you withdraw that money in retirement, you pay income taxes on every penny of it.

Roth:

(There are more nuances, but this is good enough for our purposes.)

“My,” you say, “letting that Roth money grow for decades and then not having to pay taxes on any of that money when I take it out sounds mighty nice. But I make too much money to contribute! Durn!”

Enter the backdoor Roth IRA contribution.

It enables you to effectively contribute to a Roth IRA even if you’re over the income threshold. To summarize how to do it, you:

  1. Contribute to your traditional IRA.
  2. Don’t take a tax deduction on it.
  3. Convert that money to your Roth account.

Boom. Cool kid.

Why Would You Make a Backdoor Roth IRA Contribution?

  1. You want to save more for retirement. (Technically, you want to save more for years 59 ½—when you can start withdrawing from IRAs without penalty—and older.)
  2. You make too much to contribute directly to a Roth IRA.
  3. Your company’s 401(k) doesn’t offer after-tax 401(k) contributions.
  4. You have the money to do this in addition to your 401(k) savings. 401(k) savings might include not just $24,500 pre-tax but also after-tax contributions up to $47,500 for total contributions, from all sources, of $72,000 (more if your 50+ years old). [numbers updated for 2026]

Should You?

Welp, let’s run through those reasons above and see if they apply to you.

Do you want to save more?

I mean, generally, the more money you save now, the more Future You will like Now You, the more flexibility you’ll have in the future because you did more saving in the past. And if you work in tech, probably the $7.5k IRA contribution limit isn’t that big of a bite into your income. (Exceptions always apply, of course.)

So of course as a financial planner, I’m going to reflexively encourage you to save more. But really, whether saving more for retirement/financial independence/the rest of your life is the right choice for you, I can’t know! The decision deserves a little bit of your time and thought.

There are very good reasons to spend money now instead of saving it for later. Reasons like enjoying life now (taking care of Now You) or investing money into your career.

(Side note: If you can spend money this year to make yourself a more valuable worker in some way, you will likely increase your future income way more than an extra $7.5k of retirement savings this year will increase your future investment growth.)

Are you ineligible to make a direct Roth IRA contribution?

If your income is low enough to make you eligible to contribute directly to a Roth IRA, then this backdoor nonsense doesn’t apply! Just contribute directly to the Roth IRA.

Does your 401(k) allow after-tax contributions?

If you already have a 401(k) that allows after-tax contributions (which most of the big tech companies do), then that lessens the need for a backdoor Roth IRA contribution.

Why? Because you’re already able to save roughly $30-40k via a “backdoor” method to a Roth account. It’s just a Roth 401(k) in this case; but 401(k)s and IRAs serve the same purpose, so we’re good.

Do you have the money to save more for retirement than you already can at work?

We definitely have clients who are Full Steam Ahead in saving for retirement and so they:

  1. Max out pre-tax 401(k) at $24,500 and
  2. Max out after-tax 401(k) at $30k-40k (the exact amount will depend on your company’s matching policy and, more rarely, if they put any other money into your 401(k)) and
  3. Max out their HSA at $4400 (or $8750 for a family) and
  4. Max out backdoor Roth IRA at $7500 [all numbers updated for 2026]

But How?

Here are the mechanics. (After looking here, do you even wonder why so many people screw it up, which they do, lay person and finance professional alike.)

  1. Check your traditional, rollover, SEP, or SIMPLE IRAs. Do these accounts have any pre-tax money in them?
    1. Contributions to these IRAs are usually pre-tax (i.e., you or your employer took a tax deduction for the contribution). So if there’s any money in these accounts, it’s probably pre-tax. That said, sometimes people put money into their traditional IRAs and don’t take a tax deduction for it…making the money after-tax.
    2. If you have pre-tax money in these IRAs, you need to get it out. You must have $0 pre-tax money in your IRAs.
  2. How? Roll that pre-tax money into your 401(k).
    1. Your 401(k) has to allow rollovers/roll-ins. Check your Summary Plan Description or other 401(k) paperwork, sometimes even the website, to look at the kind of contributions the plan allows. You should see the word “rollover” or similar. If you work in tech, your plan almost certainly allows this. But check first!
    2. This process can be a little clunky. Might even involve paper checks and the postal service. It’s silly.
    3. If you have any after-tax money in your IRAs, be sure to not roll that money into your 401(k). (If you’ve been good about tracking after-tax money in your IRA, you can find that number on IRS form 8606.) Leave after-tax money in your IRA. The world won’t come down around your ears if you move after-tax money into a pre-tax account, but you will pay double taxes on that money.
  3. Now that your IRAs contain either $0 or only after-tax dollars (again, that latter one is uncommon), make your annual contribution to your traditional IRA.
    1. You are not taking a tax deduction for this contribution. Hence, it is after-tax money.
  4. Ultimately, you are going to convert that $7500 to your Roth IRA. And because the $7500k is after-tax, and the Roth IRA is an after-tax account, there is no tax bill for this conversion.
    1. When you should convert is a matter of some debate. Some experts feel you need some delay—possibly you need to even invest that $7500 in the traditional IRA—between contribution to traditional IRA and conversion in order to not invite the gimlet eye of the IRS. The safest way to do this is to invest the $7500 in your traditional IRA and maybe wait an entire year before converting that money to your Roth IRA. I think most people (including financial advisors) take a far less conservative approach: they convert the money to Roth as soon as practicable after contributing it to the IRA.
    2. If you have no idea how to convert from your traditional IRA to your Roth IRA, then call the 1-800 number for the custodian where your IRAs live and ask them how to do it.
  5. Your traditional IRAs are now at $0. You need to keep the balance at $0 through the end of the year in which you do the conversion. The “why” is somewhat elaborate, so just know that if the balance is > $0 with pre-tax dollars, you’ll end up paying some tax on the conversion.
  6. Even though you don’t get any tax breaks, you must record this on Form 8606 in your taxes for the year in which you made the conversion. (Remember, making the contribution and making the conversion are two separate steps that can be done arbitrarily far apart.) If you use a CPA, tell them about your backdoor Roth IRA contribution!

Voila! You now have $7500 in your Roth IRA even though your income exceeds the income threshold for IRA eligibility. You have performed a backdoor Roth IRA conversion. Congratulations!

The key here is being able to empty your traditional, SEP, SIMPLE, or rollover IRAs of all pre-tax dollars.

Now, you might be observing, as I often have: “Hey now. I make a lot of money and so cannot make a Roth IRA contribution directly…but I’m allowed to contribute $30k-40k in after-tax money to my 401(k)? And that money is immediately converted to the Roth account, so effectively I’m making a giant Roth contribution, which is way bigger than the Roth contribution people with way lower incomes are permitted to make to an IRA? That seems…not right.”

Yep. you got it. It is not logically consistent. It is not fair, in my opinion. But it is legal. And absolutely what you should do if you can afford the extra savings, to maximize your own financial resilience and opportunities.

Want to understand all the financial opportunities available to you, even if you decide it’s not for you? Reach out and schedule a free consultation or send us an email.

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Disclaimer: This article is provided for educational, general information, and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.