By Matt Cherry, CFP®
I was meeting with a client last week—a software executive earning well into six figures—when she asked me a question I hear all the time: “I make too much to contribute to a Roth IRA, so am I just out of luck?”
The short answer: absolutely not.
If you’re a high earner who’s been shut out of direct Roth IRA contributions because of income limits, there’s a workaround that’s been gaining traction: the backdoor Roth IRA. And if your employer plan allows it, there’s an even more powerful version called the Mega Backdoor Roth that can help you save significantly more.
Let me walk you through how these strategies work, who they’re right for, and—most importantly—whether they make sense for your situation.
The Problem: Income Limits Lock You Out
With a traditional IRA, you contribute pre-tax dollars and pay taxes only on withdrawals. Roth IRAs flip the script: you contribute after-tax dollars, but qualified withdrawals down the road are completely tax-free.
The catch? If you earn above certain thresholds, the IRS won’t let you contribute directly to a Roth IRA. For 2026, here’s where those phase-outs kick in:
- Single/Head of Household: Phase-out starts at $153,000 (completely phased out at $168,000)
- Married Filing Jointly: Phase-out starts at $242,000 (completely phased out at $252,000)
If you’re over these limits, you can’t contribute directly. But here’s the thing: the IRS doesn’t limit contributions to traditional IRAs based on income—and that’s where the backdoor strategy comes in.
The Backdoor Roth: A Two-Step Workaround
The backdoor Roth isn’t some sketchy loophole—it’s a perfectly legal strategy that the IRS has effectively blessed. It works in two simple steps:
Step 1: Contribute after-tax dollars to a traditional IRA (up to $7,000 in 2026, or $8,000 if you’re 50 or older).
Step 2: Immediately convert those funds to a Roth IRA.
Since you’re contributing after-tax dollars and converting right away, there’s typically no taxable gain on the conversion. You’ve essentially side-stepped the income limits and gotten your money into a Roth.
Why Go to the Trouble? The Benefits Are Real
I get it—adding an extra step might feel like unnecessary paperwork. But for most of my high-earning clients, the benefits are absolutely worth it:
- Tax-free growth: Once the money is in a Roth, it grows tax-free. No capital gains, no dividends to report—it’s all yours.
- Tax-free withdrawals in retirement: After age 59½ (and assuming you’ve held the account for at least five years), you can withdraw every dollar without paying a cent in taxes.
- No required minimum distributions (RMDs): Unlike traditional IRAs and 401(k)s, Roth IRAs don’t force you to start taking withdrawals at age 73. This gives you incredible flexibility in retirement and makes Roths a powerful estate planning tool.
- Clean inheritance: If you want to leave assets to your kids or grandchildren, a Roth IRA is one of the cleanest ways to do it. They’ll inherit it tax-free.
These aren’t abstract benefits—I’ve seen clients in their 60s pull six figures tax-free from their Roth accounts to fund dream trips, help grandkids with college, or simply sleep better knowing they’re not handing a chunk of their retirement to the IRS.
The Pro-Rata Rule: The Big Gotcha
Here’s where things get tricky, and it’s something a lot of people miss: if you already have pre-tax money sitting in a traditional IRA, SEP-IRA, or SIMPLE IRA, the IRS’s pro-rata rule kicks in.
This rule says that when you do a Roth conversion, the IRS looks at all of your traditional IRA balances—not just the account you’re converting—and calculates the taxable portion based on the ratio of pre-tax to after-tax dollars across all accounts.
Let me give you a real example. I had a client who wanted to do a $7,000 backdoor Roth conversion. Sounds simple, right? The problem: he had $200,000 sitting in a rollover IRA from an old 401(k)—all pre-tax money.
When we ran the math, the pro-rata rule meant that about 97% of his $7,000 conversion would be taxable ($6,790), even though he contributed after-tax dollars. That ate up most of the benefit.
For clients in this situation, the backdoor Roth often doesn’t make sense—at least not without rolling that pre-tax IRA balance back into a current 401(k) first (if their plan allows it). This is why personalized advice matters. What works for one person can be a tax disaster for another.
When the Backdoor Roth Is Perfect (and When It’s Not)
The backdoor Roth works best if:
- You earn above the Roth IRA income limits.
- You have little or no pre-tax money sitting in traditional, SEP, or SIMPLE IRAs.
- You’re looking for tax diversification in retirement (a mix of pre-tax and after-tax accounts).
It’s not ideal if:
- You have substantial pre-tax IRA balances that trigger the pro-rata rule.
- You can’t afford to pay the taxes on a conversion (if applicable).
- Your employer offers a Mega Backdoor Roth option in your 401(k) (more on that below).
The Mega Backdoor Roth: A Game-Changer for High Earners
If you’re earning a high salary, receiving large bonuses, and you’ve already maxed out your regular 401(k) contributions ($23,500 in 2026, or $31,000 if you’re 50+), there’s a more powerful strategy worth exploring: the Mega Backdoor Roth.
This isn’t available to everyone—your employer’s 401(k) plan has to allow it—but if it does, it can be a massive opportunity.
Here’s how it works: the IRS allows total 401(k) contributions (employee + employer + after-tax) up to $70,000 in 2026 ($77,500 if you’re 50 or older). Most people hit their employee limit at $23,500, and maybe their employer adds another $5,000-$10,000 in matching. But if your plan allows after-tax contributions beyond that, you can contribute significantly more—and then immediately convert those after-tax dollars to a Roth 401(k) or roll them into a Roth IRA.
Example:
You max out your 401(k) at $23,500, your employer contributes $7,500 in matching, and you still have $39,000 of room left under the $70,000 total limit. If your plan allows after-tax contributions and in-plan Roth conversions, you can contribute that $39,000 after-tax and immediately convert it to Roth—giving you nearly $40,000 in a Roth account in a single year.
I have several clients who receive annual bonuses in the $50,000-$100,000 range. Instead of taking that money home (and losing 35-40% to taxes), they funnel it into after-tax 401(k) contributions and convert it to Roth. It’s one of the most tax-efficient moves available to high earners.
Why the Mega Backdoor Roth Is Especially Useful If You Have Pre-Tax IRAs
Remember the pro-rata rule I mentioned earlier? The one that can torpedo a regular backdoor Roth conversion if you have existing pre-tax IRA balances?
Here’s the key: the pro-rata rule only applies to IRA conversions—it doesn’t apply to 401(k) plans.
That means if you have $200,000 in a rollover IRA and the regular backdoor Roth doesn’t make sense because of the pro-rata calculation, the Mega Backdoor Roth through your 401(k) is a clean workaround. You’re not touching your IRA at all, so the pro-rata rule never comes into play.
For this reason, I often recommend the Mega Backdoor Roth over the regular backdoor Roth for clients who:
- Have substantial pre-tax IRA balances they can’t (or don’t want to) roll back into a 401(k).
- Earn high salaries or large bonuses and want to shelter more money in tax-advantaged accounts.
- Already max out their regular 401(k) and want to save even more.
How to Know If Your Plan Allows It
Not every 401(k) plan supports the Mega Backdoor Roth. You’ll need to check two things:
- After-tax contributions: Does your plan allow you to make after-tax (non-Roth) contributions beyond the regular $23,500 limit?
- In-plan Roth conversion or in-service distribution: Can you convert those after-tax contributions to Roth inside the plan, or roll them out to a Roth IRA while you’re still employed?
If you’re not sure, your HR or benefits team should be able to tell you. If your plan doesn’t allow it, it’s worth asking them to consider adding the feature—more and more employers are doing so as demand grows.
Let’s Talk About Your Situation
Here’s the thing about backdoor Roths—both the standard version and the Mega version: they’re powerful tools, but they’re not one-size-fits-all. The right strategy depends on your income, your existing retirement accounts, your tax situation, and what your employer plan allows.
I’ve had clients where a backdoor Roth was a no-brainer, and others where it would have been a costly mistake. The difference came down to the details.
If you’re curious whether a backdoor Roth or Mega Backdoor Roth makes sense for you, let’s have a conversation. We can look at your full financial picture, run the numbers, and figure out the best path forward—no generic advice, just a strategy built around your goals.
At ABLE Financial Group, we work as independent fiduciaries, which means we’re always acting in your best interest. Whether it’s Roth conversions, tax planning, or building a comprehensive retirement strategy, we’re here to help you make decisions with clarity and confidence.
Interested in exploring whether this strategy fits your situation? Reach out—I’d love to walk through it with you. You can call me directly at 480.494.2214 or email me at matt@ablefinancialgroup.com.
Frequently Asked Questions About Backdoor Roth IRAs
Can I do a backdoor Roth IRA if I already have a traditional IRA?
Yes—but there’s an important tax consideration. The IRS’s pro-rata rule requires that all of your traditional IRA balances (including SEP and SIMPLE IRAs) be included when calculating the taxable portion of your conversion, which means if you have pre-tax money in any IRA, a portion of your backdoor Roth conversion will likely be taxable—even if your new contribution was after-tax—so for high earners with larger IRA balances, it’s important to run the numbers before moving forward.
How much can I contribute to a backdoor Roth IRA in 2026—and what about a Mega Backdoor Roth?
For 2026, you can contribute $7,000 if you’re under age 50 or $8,000 if you’re 50 or older, and while the conversion itself has no limit, the backdoor Roth strategy is generally capped by these IRA contribution limits; however, some high earners may also have access to a Mega Backdoor Roth through their 401(k), which—if the plan allows after-tax contributions and conversions—can enable significantly larger contributions and Roth savings each year.
Is a backdoor Roth (or Mega Backdoor Roth) worth it for high-income earners?
For many high earners, a backdoor Roth can be a valuable way to achieve tax-free growth, tax-free withdrawals, and avoid required minimum distributions, but the strategy isn’t one-size-fits-all, as factors like existing IRA balances, potential tax exposure from the pro-rata rule, and whether a Mega Backdoor Roth is available through an employer plan all influence the outcome, making it important to evaluate how this fits within your broader tax and retirement strategy.
About Matt
Matt Cherry, CFP® is a distinguished professional with a Magna Cum Laude degree in finance from the WP Carey School of Business at Arizona State University. He is also a CERTIFIED FINANCIAL PLANNER®, showcasing his dedication to excellence. After starting his career at Charles Schwab and working with an independent firm for a few years, Matt joined ABLE Financial Group in January 2021. At ABLE Financial Group, he specializes in Social Security planning and played a key role in implementing the industry-leading planning software, eMoney.
Passionate about giving back, Matt has been a Big Brother with Valley Big Brothers and Big Sisters, fostering mentorship and support. He volunteers with various organizations in the Valley and sits on the Professional Advisory Council for the Southwest Autism Research and Resource Center (SARRC).
An avid cyclist, Matt completed the challenging “America’s Most Beautiful Bike Ride” twice, riding 100 miles around Lake Tahoe to raise funds for the Leukemia and Lymphoma Society. A severe back injury in 2017 led to surgery and a shift in his cycling path. However, this adversity introduced a new passion – YOGA. Matt’s daily yoga practice has become a cornerstone of his life, contributing not only to his physical well-being but also playing a crucial role in his recovery and ability to walk.
Outside the office, Matt revolves around his two delightful daughters, Emma & Lyla. Being an Arizona native, family time often involves exploring the state and enjoying weekends on the beach in Mexico for rest and relaxation.
