Backdoor Roth IRA Calculator
Determine if you need a backdoor Roth IRA based on your income, calculate the impact of the pro-rata rule if you have existing traditional IRA balances, and project your tax-free retirement savings.
Your Information
Existing Pre-Tax IRA Balances
These affect the pro-rata rule for backdoor Roth conversions
🚪 Backdoor Roth Required
Your income ($180,000) exceeds the Roth IRA contribution limit. Use the backdoor Roth strategy to contribute.
Projected Roth Balance at Retirement
After 30 years of $7,000/year contributions
Strategy Comparison
| Strategy | Balance at Retirement | After-Tax Value | vs. Backdoor Roth |
|---|---|---|---|
| Backdoor Roth IRA | $707,511 | $707,511 | — |
| Traditional IRA (if deductible) | $707,511 | $445,732 | -$261,779 |
| Taxable Brokerage Account | $581,200 | $581,200 | -$126,311 |
How to Execute a Backdoor Roth
- Step 1: Contribute to a Traditional IRA (non-deductible)$7,000
- Step 2: Wait 1-2 days (some wait longer to be safe)
- Step 3: Convert the Traditional IRA to Roth IRA
- Step 4: File Form 8606 with your tax return
Understanding the Backdoor Roth
What is a Backdoor Roth?
A backdoor Roth is a legal strategy for high earners to contribute to a Roth IRA by first contributing to a traditional IRA (non-deductible) and then converting it to a Roth IRA.
The Pro-Rata Rule
If you have existing pre-tax IRA balances, the IRS treats all your IRAs as one pool. A portion of your conversion will be taxable based on the ratio of pre-tax to after-tax money.
Avoiding Pro-Rata Issues
Roll your traditional IRA into your 401(k) before doing a backdoor Roth. This removes the pre-tax balance from the pro-rata calculation.
Mega Backdoor Roth
If your 401(k) allows after-tax contributions and in-service withdrawals, you may be able to contribute up to $69,000/year (2024) and convert to Roth.
Frequently Asked Questions
What is a backdoor Roth IRA?
A backdoor Roth IRA is a legal strategy that allows high-income earners to contribute to a Roth IRA even when their income exceeds the direct contribution limits. It involves:
- Contributing to a traditional IRA (non-deductible)
- Converting that traditional IRA to a Roth IRA
What is the pro-rata rule?
The pro-rata rule requires you to consider all your traditional IRA balances (including SEP and SIMPLE IRAs) when converting to Roth. If you have pre-tax money in any IRA, a proportional amount of your conversion will be taxable.
Example: If you have $95,000 pre-tax in a traditional IRA and contribute $5,000 non-deductible, only 5% of your conversion ($250) will be tax-free. The other 95% ($4,750) will be taxable.
What are the Roth IRA income limits for 2024?
| Filing Status | Phaseout Begins | Phaseout Ends |
|---|---|---|
| Single | $146,000 | $161,000 |
| Married Filing Jointly | $230,000 | $240,000 |
How do I avoid the pro-rata rule?
The best way to avoid the pro-rata rule is to roll your traditional IRA into your 401(k) before doing a backdoor Roth. This removes the pre-tax balance from the calculation. Check if your 401(k) plan accepts incoming rollovers.
Is the backdoor Roth IRA legal?
Yes, the backdoor Roth IRA is completely legal. It has been used for years and was implicitly endorsed when Congress considered but did not pass legislation to close this strategy. However, tax laws can change, so consult a tax professional.