The Backdoor Roth IRA is a strategy used by high-income earners that do not qualify to make direct contributions to a Roth IRA.
The strategy used by high-income earners to make Roth IRA contributions involves the making of non-deductible contributions to a traditional IRA and then converting those funds in the non-deductible traditional IRA to a Roth IRA. This is oftentimes referred to as a “back door” Roth IRA. In the end, you don’t get a tax deduction in the amounts contributed, but the funds are held in a Roth IRA and grow, then come out tax-free upon retirement (just like a Roth IRA). Here’s how it works.