{"id":182,"date":"2023-05-22T12:00:00","date_gmt":"2023-05-22T12:00:00","guid":{"rendered":"https:\/\/moneywithkatie.com\/how-to-contribute-to-a-roth-ira-if-youre-over-the-income-limit\/"},"modified":"2025-08-29T16:48:43","modified_gmt":"2025-08-29T16:48:43","slug":"how-to-contribute-to-a-roth-ira-if-youre-over-the-income-limit","status":"publish","type":"post","link":"https:\/\/moneywithkatie.com\/how-to-contribute-to-a-roth-ira-if-youre-over-the-income-limit\/","title":{"rendered":"Going Through the Backdoor (Roth IRA) in 2025"},"content":{"rendered":"
\n

Welcome to the world of Tiny Violin Problems, my friend. <\/p>\n

If you make too much money to contribute to a Roth IRA per the IRS<\/span><\/a>, you\u2019ve officially entered the realm of TVPs, amongst the opulent ranks of, \u201cThere\u2019s no more room for overhead luggage in First Class so I have to gate-check my bag,\u201d and, \u201cI\u2019m not sure which down parka to bring to Aspen this winter.\u201d<\/p>\n

There are certainly worse problems in the personal finance world, and luckily for you, this one can be circumvented with a little extra legwork.<\/strong> <\/p>\n

In 2025, the single income limit<\/a> for investing in a Roth IRA is a modified adjusted gross income (or MAGI, like \u201cwe three kings\u201d) of $165,000 ($246,000 if married filing jointly), but you can\u2019t take that at face value. <\/p>\n

(Reminder: If you\u2019re filing for the 2024 <\/em>tax year, the numbers are a little different<\/a>. But if you\u2019re looking ahead for 2025\u2026keep reading!)<\/p>\n<\/div>\n

\n
\n

2024 Roth IRA income limits<\/h2>\n<\/div>\n

\"\"\/<\/p>\n

\n

Someone making six figures who also<\/em> reads this blog is likely contributing the maximum to their Traditional 401(k), which means they\u2019re probably claiming a deduction of $23,500 in 2025<\/span><\/a>\u2014which means they\u2019d probably need to make closer to $188,500 single and $293,000 married in order to be totally<\/em> phased out (because $293,000 married minus a $23,500 contribution for each partner<\/em> is that upper $246,000 limit).<\/p>\n<\/div>\n

\n
\n

Why a Roth IRA is worth your time<\/h2>\n

Besides tax-free growth and withdrawals, the Roth IRA allows you to access the principal at any time before age 59.5 with no penalties (the growth<\/em> on that principal is treated differently, though). <\/p>\n

Because of this easy-access feature, Roth IRAs are a super flexible investment vehicle for retirement (and even more flexible if you\u2019re planning to be an early retiree, thanks to the whole \u201cno penalties on your own contributions before you\u2019re gray\u201d thing). <\/p>\n

But what should you do if you\u2019re unable to contribute to a Roth IRA because you make too much money? The Backdoor Roth IRA.<\/p>\n

You should be able to pull this off without any tax penalties, but there\u2019s one scenario to be aware of that might trigger a tax bill that I note at the end of the steps below. Make sure to read through to the end, because it will likely determine whether or not you choose to attempt this.<\/p>\n

(You might also wonder if a taxable brokerage account is a better fit\u2014and it might be, but think about the main similarity between a Roth IRA and a regular ol\u2019 taxable investing account: You\u2019re already using post-tax dollars. Where you may otherwise jump straight to taxable investing after your 401(k), this is a way to sock away $7,000 post-tax dollars in an account that\u2019ll grow and be accessible tax-free forever.)<\/p>\n<\/div>\n

\n
\n

\u201cBackdoor Roth IRA\u201d: the TL;DR<\/h2>\n

In a Backdoor Roth IRA (the potential for sexual innuendos abound!), you create a Traditional IRA and make a non-deductible contribution<\/strong> (in other words, you\u2019re using money you\u2019ve already paid taxes on, which likely means it\u2019s just the money sitting in your checking or savings account).<\/p>\n

You\u2019re probably like, \u201cWhat\u2019s the point of a Traditional IRA if the main benefit of the account doesn\u2019t work for me?\u201d But the ability to convert IRAs from Traditional to Roth<\/strong> is your bread and butter here. <\/p>\n

Here\u2019s how it works:<\/p>\n

    \n
  1. \n

    Open a Traditional IRA account with your brokerage firm of choice. Open a Roth IRA with the same firm, if you don\u2019t have one with them yet.<\/p>\n<\/li>\n

  2. \n

    Fund the Traditional IRA to the 2024 IRA contribution limit (assuming that\u2019s your plan for the year): $7,000. Leave the funds in the money market\/cash balance; don\u2019t invest it yet!<\/p>\n<\/li>\n

  3. \n

    Wait a few days for the funds to settle.<\/p>\n<\/li>\n

  4. \n

    Convert the cash to Roth (big brokerage firms know how to do this; if you need help, you can ask! There should literally be a button that says \u201cConvert to Roth\u201d). Because the funds aren\u2019t invested yet, there will be no gains to pay taxes on. You already have a Roth IRA ready and waiting from Step #1.<\/p>\n<\/li>\n

  5. \n

    Invest in the index funds of your choice within the Roth IRA with the funds you converted.<\/p>\n<\/li>\n<\/ol>\n

    And\u2026that\u2019s it.<\/p>\n

    There\u2019s just one small snafu to note, per my earlier comments about being able to access contributions at any time: When you convert funds to Roth in the Backdoor Roth IRA process, you now have to wait five years<\/span><\/a> before you can access the principal (hopefully this is no showstopper for someone with their other financial ducks in a row).<\/p>\n

    When does this make sense?<\/h3>\n

    If you meet the qualifications above and you\u2019re feeling comfortable so far, I\u2019d consult an accountant for one last gut-check, then give it a go. However, one thing to note from a tax optimization standpoint is that this process should probably come after<\/em> you\u2019re able to contribute the maximum to your 401(k) for the year. <\/p>\n

    You can do them simultaneously, of course, but if you\u2019re not getting the most tax-deferred bang for your buck at your income level, the Backdoor Roth IRA probably<\/em> shouldn\u2019t be priority #1, in my opinion.<\/p>\n<\/div>\n

    \n
    \n

    When shouldn\u2019t<\/em> you do a Backdoor Roth IRA?<\/h2>\n

    If you already have Traditional IRAs lying around like discarded Fiji water bottles (I assume you drink Fiji water because\u2026well, you know), you\u2019re going to be subject to this convoluted thing called the IRS pro rata rule<\/strong>, which will result in a tax bill. <\/p>\n

    I spent about an hour reading IRS.gov articles about this rule, and now, all I\u2019m (kind of) confident about is this: The breakdown between your existing pre- and post-tax dollars in your existing Traditional IRAs will determine the amount of your Roth conversion that\u2019s taxable.<\/p>\n<\/div>\n

    \n
    >
    \n \u201c<\/span>Depending on how much money you\u2019ve got in those other IRAs, your tax bracket, and how much you\u2019re trying to roll over, this could create a hefty tax bill come April.\u201d<\/span>\n <\/p><\/blockquote>\n<\/figure>\n
    \n

    Yeah, I didn\u2019t get that either. Let\u2019s do an example.<\/p>\n

    If you already have $50,000 in a Traditional IRA that you created with deductible, pre-tax contributions (before you were a high roller) and you add another $7,000 post<\/em>-tax with the intention of converting it to Roth, only about 11.5% of the total amount in your Traditional IRAs is post-tax ($6,555 of the $57,000).<\/p>\n

    As such, 11.5% of your Roth conversion will be tax-free\u2014but you\u2019ll be taxed on the other 88.5% of the conversion. If you\u2019re in the 24% income bracket, you\u2019d pay $1,570 in taxes on the conversion of post-tax dollars to Roth (the 88.5% of your conversion ($6,555) x 24%). <\/p>\n

    TL;DR<\/strong>: Depending on how much money you\u2019ve got in those other IRAs, your tax bracket, and how much you\u2019re trying to roll over, this could create a hefty tax bill come April.<\/p>\n

    For that reason, I\u2019d really only attempt this (on your own) if you do not<\/strong> have a big balance in a Traditional IRA already (including SEP IRAs, rollover IRAs, etc.\u2014and to be super clear, your Traditional 401(k) doesn\u2019t count<\/strong>!).<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    Welcome to the world of Tiny Violin Problems, my friend.  If you make too much money to contribute to a Roth IRA per the IRS, you\u2019ve officially entered the realm of TVPs, amongst the opulent ranks of, \u201cThere\u2019s no more room for overhead luggage in First Class so I have to gate-check my bag,\u201d and, […]<\/p>\n","protected":false},"author":178814,"featured_media":2414,"comment_status":"closed","ping_status":"open","sticky":false,"template":"si-template-single-post-401-k-s-and-iras.php","format":"standard","meta":{"footnotes":""},"categories":[37,35],"tags":[47,57],"class_list":["post-182","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-independence","category-investing-and-taxes","tag-401ks-and-iras","tag-popular-401ks-and-iras"],"yoast_head":"\nGoing Through the Backdoor (Roth IRA) in 2025 - Money with Katie<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/moneywithkatie.com\/how-to-contribute-to-a-roth-ira-if-youre-over-the-income-limit\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Going Through the Backdoor (Roth IRA) in 2025 - 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