If you earn too much to contribute directly to a Roth IRA, there may still be a way to save tax-free for retirement. Financial professionals commonly refer to this strategy as a “backdoor Roth IRA.” Although it isn’t an official term, it describes a specific Roth conversion process.

In this week’s Money Wisdom Question Series, Heath Grossman, CFP® explains how a backdoor Roth IRA works and whether it could be a suitable option for you.

What Is a Backdoor IRA?

A backdoor Roth IRA involves making a non-deductible contribution to a traditional IRA and then converting those funds into a Roth IRA. Keep in mind, you can contribute to a traditional IRA regardless of participation in an employer-sponsored retirement plan. However, higher income levels may limit your ability to deduct those contributions.

Another key consideration is the aggregation rule. This rule requires you to treat all IRA assets as a single combined balance when determining the tax impact. As a result, if you have existing pre-tax IRA funds, part of your conversion will likely be taxable. This strategy tends to work best for individuals who have little to no pre-tax IRA balances.

Are There Income Limits?

Currently, there are no income limits for performing a Roth IRA conversion. This is why higher-income individuals commonly use strategies like the backdoor Roth IRA. However, there are annual contribution limits for IRAs. As of 2026, individuals under age 50 can contribute up to $7,500, while those 50 and older can contribute up to $8,600.

What Are the Potential Pros and Cons?

Pros: Qualified withdrawals from a Roth IRA are generally tax-free. Additionally, Roth IRAs are not subject to required minimum distributions (RMDs) during the original owner’s lifetime. This can make them a useful estate planning tool for passing on tax-advantaged assets.

Cons: If you have other IRA assets funded with pre-tax contributions, part of the conversion could be taxable. Additionally, a conversion could increase your taxable income for the year, potentially pushing you into a higher tax bracket. A five-year waiting period also exists before you can withdraw converted funds penalty-free.