While a Roth IRA has many advantages, there are strict income limits. In 2026, the ceiling to make a full contribution is a modified adjusted gross income (MAGI) of $143,000 for individual filers and $242,000 for married couples filing jointly.
There's a loophole, known as a backdoor Roth IRA, that can enable high earners to get around those limits
"I have several clients that utilize this strategy," says Faron Daugs, a CFP and wealth advisor at Harrison Wallace Financial Group. "It's an effective means of saving more money on a tax-free basis."
What is a Roth IRA?
A Roth IRA is a tax-advantaged retirement savings account funded by after-tax dollars. Your money grows tax-free and you can make tax-free withdrawals in retirement.
Contributions can be withdrawn at any time and for any reason with no taxes or penalties. Earnings can be withdrawn tax-free if you are at least 59½ and the account is at least 5 years old.
Roth IRAs do not require investors to take Required Minimum Distributions (RMDs), but they do have contribution and income limits.
Roth IRA contribution and income limits
In 2026, the annual limit on Roth IRA contributions is $7,500.
Single or head-of-household filers can make the full contribution to a Roth IRA if their modified adjusted gross income (MAGI) is less than $153,000. You can still make a partial contribution if your income is between $153,000 and $167,599.
If you're married filing jointly, you can make the full contribution if your MAGI is under $242,000 and a partial contribution if it's $242,000 and $251,999.
Usually, individual filers who earn $168,000 or more are ineligible for a Roth IRA, as are married couples filing jointly with a MAGI over $252,000 and married couples filing separately with a MAGI over $10,000.
You can get around that income limit, though, with a backdoor Roth IRA conversion.
How a backdoor Roth IRA works
If your income places you above the threshold for a Roth IRA, you can make a contribution to your traditional IRA with after-tax money and then quickly transfer the funds into a Roth IRA.
"Even if you pay tax now at the top tax bracket, this money will grow tax-free until retirement, when you are able to withdraw the funds and pay no tax," Abby Donnellan, senior tax strategist at Moneta Group, told CNBC Select.
Donnellan does caution that large Roth IRA conversions aren't for everyone.
"Depending on your age, tax bracket, the balance in your account and beneficiary information, conversions may or may not be beneficial," she said.
Generally, you should only do a Roth conversion if you have enough cash to cover your conversion taxes out of pocket and are fairly sure you'll be in a higher tax bracket in retirement.
CNBC Select rates Charles Schwab as a top option for both traditional and Roth IRAs, with its own robo-advisor platforms and trading accounts, so you can do all of your investing in one place.
Betterment offers traditional, Roth and SEP IRAs. With a minimum balance of $100,000, you can get unlimited access to a financial advisor.
Charles Schwab
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit
Fees
Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract
Bonus
None
Investment vehicles
Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™, Schwab Organization Account and Schwab Trading Powered by Ameritrade™
Investment options
Stocks, bonds, mutual funds, CDs and ETFs
Educational resources
Extensive retirement planning tools
Terms apply.
Betterment
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. For example, Betterment doesn't require clients to maintain a minimum investment account balance, but there is a ACH deposit minimum of $10. Premium Investing requires a $100,000 minimum balance.
Fees
Fees may vary depending on the investment vehicle selected, account balances, etc. Click here for details.
Investment vehicles
Robo-advisor: Betterment Digital Investing IRA: Betterment Traditional, Roth and SEP IRAs 401(k): Betterment 401(k) for employers
Investment options
Stocks, bonds, ETFs and cash
Educational resources
Betterment offers retirement and other education materials
Terms apply. Does not apply to crypto asset portfolios.
The pro rata rule
You may run into issues if you have funds in other traditional IRAs that you're not converting into your Roth IRA. The IRS's "pro rata" rule means any traditional, SEP and SIMPLE IRAs are treated as one whole balance, so you'll have to figure the ratio of pre-tax IRA funds to your total non-Roth IRA balances.
If you have $90,000 in pre-tax IRA money and contribute $10,000 (non-deductible), your total IRA balance is now $100,000. If you convert that $10,000 to a Roth, only 10% is tax-free.
Since the IRS treats all non-Roth IRAs as a single pool for this calculation, you can't selectively convert only your after-tax contributions.
Make the conversion and contribution quickly enough to minimize any investment earnings that would be taxable upon conversion. Timing is important: The calculation is based on your IRA balances as of Dec. 31 of the conversion year.
Because of the complexity of the process and the tax implications, it's recommended to work with a financial advisor or tax professional on a conversion.
Backdoor Roth IRA: pros and cons
- High earners can enjoy the benefits of a Roth IRA
- Tax-free growth and withdrawals in retirement
- No required minimum distributions
- Your beneficiaries can inherit the account tax-free
- A large conversion could push you into a higher tax bracket
- You may have to pay income tax on the converted earnings and deductible contributions.
- Converted funds must stay in the Roth IRA for five years to avoid early withdrawal penalties
FAQs
What is a Roth IRA?
Introduced as part of the Taxpayer Relief Act of 1997, a Roth IRA allows workers to contribute after-tax money into a retirement fund and enjoy tax-free growth and withdrawals. It's particularly beneficial if you expect to be in a higher tax bracket when you retire.
What's the biggest drawback to a backdoor Roth IRA?
The biggest drawback of a backdoor Roth IRA is the tax implications: If you have any pre-tax money in traditional IRAs, you can't convert just the after-tax contribution. The pro rata rule means all your IRA funds are viewed as a single pool. Part of your Roth conversion will be taxable, even if you only contributed after-tax dollars.
What is a mega backdoor Roth IRA?
If you've maxed out your pretax 401(k) contributions but earn too much for a Roth account, a mega backdoor conversion enables you to transfer after-tax 401(k) contributions into a Roth IRA or Roth 401(k), if your plan allows.
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