Backdoor Roth IRA Demystified
What if I told you a simple strategy could save you hundreds of thousands of dollars in taxes over your lifetime? No, it’s not a complex real estate cost segregation and depreciation strategy. No, it’s not something that will cost thousands of dollars in accounting fees. No, you don’t need to buy a G-Wagon to do it. If you’re a big law attorney, you probably know you make too much money to contribute to a Roth IRA. In 2025, if you make over $150,000 as a single filer, or $236,000 as a married joint filer, you cannot contribute directly to a Roth IRA. As a first-year associate making market salary, you’re already well above the income limit. But here’s the kicker, missing out on Roth IRA contributions could potentially cost you over one hundred thousand dollars in tax benefits over your lifetime. I did a rough math and found that if someone invested $7,000 per year, which is the max contribution for a Roth IRA in 2025, over a 30-year period, but invested in a taxable account instead of a Roth IRA, they’d miss out on over $100,000 in tax-free growth. So how can you take advantage of Roth IRAs even if you make too much money? Enter the backdoor Roth strategy. The backdoor Roth strategy is a loophole in the tax code that allows high-income earners to bypass the income limitations of Roth IRAs. I don't like the word loophole because it sounds like some shady strategy. Fortunately, Congress gave the backdoor Roth IRA its blessing back in 2018, so go check that out if you’re skeptical. The idea is to make a nondeductible contribution to a Traditional IRA because it has no income limitations and convert that money to a Roth. That’s why it’s called the backdoor strategy. If you want a step-by-step guide on how to properly execute the strategy, check out my most recent blog article in my linkin bio. #taxplanning #financialplanning #biglaw --------------------------------------------------------------- SharpEdge Financial is an independent financial planning firm helping Millennial and Gen Z attorneys navigate the complex financial decisions that they face daily. Whether you’re just starting off in Big Law, about to make partner, or considering moving to an in-house role, we can help. If you want to take charge of your finances → Click the link in my bio to schedule a call! *This post is for general education only, not financial, tax, or legal advice*
