Can You Do a Backdoor Roth IRA Every Year? (Yes, But Watch Out for These Pitfalls)

Are you a high-income earner who’s frustrated by those pesky Roth IRA income limits? The backdoor Roth IRA strategy might be your ticket to tax-free retirement growth But can you actually use this strategy year after year? Let’s dive into everything you need to know about performing backdoor Roth contributions annually,

The Short Answer: Yes, You Can!

Yes, you can do a backdoor Roth IRA every year – as long as you follow the rules and stay within contribution limits. This strategy remains a powerful tool for high-income earners who want to build tax-free retirement savings despite being over the income thresholds for direct Roth contributions.

What Exactly Is a Backdoor Roth IRA?

Let’s make sure we all agree on what a backdoor Roth IRA is before we go any further.

A backdoor Roth IRA isn’t an official account type – it’s a strategy that high-income earners use to get around the income limits for Roth IRA contributions. As of 2025, you can’t directly contribute to a Roth IRA if you’re:

• Single with a modified adjusted gross income (MAGI) over $161,000
• Married filing jointly with a MAGI over $240,000

The backdoor strategy involves two key steps

1. Making a non-deductible (after-tax) contribution to a traditional IRA
2. Converting that traditional IRA to a Roth IRA shortly afterward

Since the money you contributed has already been taxed, there’s usually no additional tax due on the conversion (with some important exceptions we’ll cover).

The Annual Backdoor Roth Process

Here’s how to perform a backdoor Roth IRA each year:

1. Open a traditional IRA (if you don’t already have one)
2. Make a non-deductible contribution to your traditional IRA (up to the annual limit)
3. Convert those funds to your Roth IRA (ideally quickly, before any earnings accumulate)
4. Document everything properly by filing Form 8606 with your taxes

For 2025, you can contribute up to $7,000 to an IRA ($8,000 if you’re 50 or older), as long as you have at least that much earned income for the year.

Why You’d Want to Do a Backdoor Roth Every Year

The benefits of making this an annual practice are significant:

• Tax-free growth: All future investment gains will never be taxed (if you follow withdrawal rules)
• No required minimum distributions (RMDs): Unlike traditional IRAs, Roth IRAs don’t require withdrawals at any age
• Excellent estate planning tool: Your heirs can inherit your Roth IRA tax-free
• Emergency fund potential: Contributions (but not earnings) can be withdrawn anytime without penalties

The Critical Pro-Rata Rule Warning

Here’s where many people get tripped up with backdoor Roths If you have ANY existing pre-tax IRA funds (traditional, SEP, SIMPLE, or rollover IRAs), the IRS applies something called the “pro-rata rule” that can make part of your conversion taxable

Here’s how it works:

Let’s say you have $100,000 in pre-tax IRA funds and you make a $6,000 non-deductible contribution to a traditional IRA. When you convert that $6,000 to Roth, the IRS looks at your TOTAL IRA balance as of December 31 of that tax year.

In this example, 94.34% ($100,000 ÷ $106,000) of your IRA funds are pre-tax. This means that 94.34% of your $6,000 conversion ($5,660) would be taxable income. In the 24% tax bracket, that’s an extra $1,358 in taxes!

Solving the Pro-Rata Problem

If you have existing pre-tax IRAs, consider these options before doing a backdoor Roth:

1. Roll your pre-tax IRAs into your employer’s 401(k) if the plan allows it
2. Open a solo 401(k) if you’re self-employed and roll your IRAs there
3. Convert all your pre-tax IRAs to Roth (but be prepared for the tax bill)

These strategies can “zero out” your pre-tax IRA balances, making future backdoor Roth conversions tax-efficient.

Step-by-Step Annual Backdoor Roth Process

To make this an annual practice, follow these steps:

1. Timing Your Contribution

You can make your IRA contribution anytime from January 1 of the current year until the tax filing deadline (usually April 15) of the following year. Many people prefer making their contribution early in the year to maximize tax-free growth.

2. Make Your Non-Deductible Contribution

Choose a custodian like Vanguard, Fidelity, or another brokerage and contribute up to the annual limit ($7,000 or $8,000 if 50+ for 2025).

3. Convert Quickly (But Not Too Quickly)

Convert the funds to your Roth IRA as soon as possible to minimize earnings that would be taxable. However, some advisors recommend waiting a few days between contribution and conversion to avoid any potential IRS scrutiny.

4. Document Everything on Form 8606

This form tells the IRS that your traditional IRA contribution was non-deductible. If you don’t file this form, the IRS will assume it was a deductible contribution, and you’ll end up paying taxes twice!

5. Invest Your Roth Funds

Don’t forget to invest the money in your Roth IRA once it’s there! Your Roth is a great place for high-growth investments because all future gains will be tax-free.

Is There Any Risk the Backdoor Roth Strategy Will End?

There’s always some political risk with tax strategies. Congress has occasionally discussed eliminating the backdoor Roth strategy, especially after reports that some billionaires have used similar techniques to amass enormous tax-free accounts.

As Wade Pfau, a retirement income professor at The American College of Financial Services, notes, “the IRS has said they’re OK with this move short of new legislation formally blocking it.”

For now, the strategy remains legal, but it’s worth staying informed about potential tax law changes.

Common Questions About Annual Backdoor Roth Contributions

Do I need to wait between contributions?

No, you can do a backdoor Roth every year as long as you don’t go over the limits on how much you can put in each year.

What if I miss filing Form 8606?

You should file an amended return with Form 8606 as soon as possible. This form is crucial for establishing the non-deductible basis in your IRA.

Can I do multiple backdoor Roth conversions in the same year?

You can only contribute up to the annual IRA limit each year ($7,000 or $8,000 if 50+ for 2025), but you can convert larger amounts if you have additional pre-tax IRA funds (though those conversions would be taxable).

What if I already made a direct Roth contribution but later realized my income was too high?

You’ll need to contact your IRA custodian about a “recharacterization” to move the funds to a traditional IRA, then proceed with the backdoor strategy.

Final Thoughts

The backdoor Roth IRA is a valuable strategy that high-income earners can use year after year to build tax-free retirement savings. While it requires careful attention to the rules – especially the pro-rata rule – the long-term benefits can be substantial.

Remember these key points:

• Yes, you can do a backdoor Roth IRA every year
• Watch out for the pro-rata rule if you have existing pre-tax IRAs
• Document everything with Form 8606
• Consider rolling pre-tax IRAs into employer plans before executing this strategy

By making backdoor Roth contributions an annual practice, you’ll be building a powerful tax-free retirement account that can provide financial security for decades to come.

Have you used the backdoor Roth strategy? What has your experience been like? We’d love to hear your thoughts in the comments!