Backdoor Roth IRA in 2025: Step-by-Step Guide for High Earners

The Backdoor Roth IRA remains one of the most powerful retirement strategies for high earners who exceed the Roth IRA income limits. This guide walks you through the 2025 process, clarifies the pro-rata rule, and highlights filing requirements so you avoid costly mistakes.

What Is a Backdoor Roth IRA?

A Backdoor Roth IRA is a two-step process: contribute to a non-deductible Traditional IRA, then convert those funds to a Roth IRA. The goal is to get money into a Roth despite income phase-outs.

2025 Contribution Limits

• Traditional/Roth IRA limit: $6,500–$7,500 (catch-up) in 2024; check IRS for 2025 updates
• Roth IRA income phase-outs apply; Backdoor route bypasses them
• Consider employer plans for Mega Backdoor via after-tax 401(k) if available

Step-by-Step Execution

1. Open/confirm a Traditional IRA and a Roth IRA at your custodian.
2. Contribute after-tax dollars to the Traditional IRA (non-deductible).
3. Wait for funds to settle (often 1–2 days), then initiate a Roth conversion.
4. Invest the Roth funds according to your asset allocation policy.

Tax Reporting (Form 8606)

• Report the non-deductible contribution and the Roth conversion on Form 8606.
• Keep records of your IRA basis to avoid double taxation in future years.

Common Mistakes to Avoid

• Leaving pre-tax IRA balances, triggering the pro-rata rule unexpectedly.
• Contributing deductible dollars by mistake.
• Waiting too long between contribution and conversion, creating taxable earnings.

Where This Fits in Your Plan

Backdoor Roth funds grow tax-free and are not subject to RMDs, making them ideal for long-term, high-growth assets. See our Retirement Planning guide and track progress in Wealth Tracking.