What is a backdoor Roth?

Answer by Wray Rives:

There is an income limitation to be able to make a contribution to a ROTH IRA.  For 2015 the limits are:
  • Married Filing Joint $183K-$193K reduced contribution
  • Married Filing Joint over $193K no contribution
  • Single or HOH $116K-$131K reduced contribtion
  • Single or HOH over $131K no contribution
You can still contribute to a Non-Deductible Traditional IRA with no income limits and then convert the non-deductible IRA to a ROTH IRA.  You pay tax on any earnings that are in the Traditional IRA.
There are some catches to doing this which can have very negative tax consequences, so I would suggest you talk to your tax professional before you undertake a Backdoor ROTH.

What is a backdoor Roth?