Craig Wear, CFP®Craig Wear, CFP® | Expert in Roth Conversions & Tax-Efficient Retirement Strategies for IRA Millionaires

How the Rich Avoid Taxes with the Backdoor Roth IRA Strategy

26 Sept 2025 · 2 min

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1:37

Craig Wear, CFP® (video dated Sept 26, 2025) explains the backdoor Roth IRA: high earners who exceed Roth contribution income limits can legally fund a Roth by making a non-deductible contribution to a Traditional IRA and immediately converting it to a Roth (the conversion has no income limit). He gives three steps (open Traditional IRA + non-deductible contribution → convert to Roth → tax-free growth) and cautions not to invest before conversion to avoid taxable gains and to file IRS Form 8606. He notes the strategy was made legal by Congress in 2010 and highlights a more efficient alternative for those with large 401(k) balances — doing Roth conversions of existing pre-tax retirement accounts instead of relying on backdoor contributions.

Questions this video answers

Single filers over $144,000; married filing jointly over $228,000 (2025).

2010.

Form 8606.

September 26, 2025.

Chapters

The backdoor Roth how high earners avoid taxes. If you make over $144,000 as a single filer or 228,000 jointly as a married filing joint in 2025, you're not allowed to directly contribute to a Roth IRA. But wealthy people have found a perfectly legal way around this. It's called a backdoor Roth conversion. And here's how it works. So step one, you open up a traditional IRA and you make a non deductible contribution. Step number two, you convert that money into a Roth ira. There's no income limit on the conversions when you do it that way. Step number three, that money now grows tax free for life, just like a regular Roth. So this move was made legal by Congress in 2010. And yeah, it's still available, but just to make sure you don't invest the money before converting or you could trigger some gains on the taxes. And as always, you got to report it properly. There's this form, it's called an 8606 form. You use it to avoid IRS headaches. You if you're a high earner and you want tax free retirement income, this is your loophole and you can use it as long as it lasts. But a little plot twist here to this video is there's a much more efficient way of getting money into a Roth IRA if you have a lot of other money already sitting in your 401k. So instead of wasting time and energy on backdoor Roth IRAs, really doing a Roth conversion of your existing funds is going to be much more efficient use of your money and you can get a lot more money over there. If you're going to pay taxes, you might as well pay tax on getting the existing money. That's going to cause a problem later converted to a Roth. So that's a much better way to get it done. But at least now you know the rules on the backdoor Roth.