As a high-earning dental professional, you’re likely no stranger to the challenge of retirement planning within IRS income limits. One common frustration? Not qualifying for direct Roth IRA contributions due to income restrictions. Enter the Backdoor Roth IRA conversion—a powerful (and legal) strategy that allows high-income earners like dentists to build tax-free retirement income.
What is a Backdoor Roth IRA?
A Backdoor Roth IRA is a workaround strategy that allows high-income individuals to legally fund a Roth IRA, even if they exceed the income limits.
Here’s how it works in two simple steps:
- Contribute to a Traditional IRA (non-deductible)
You make a non-deductible contribution—up to $7,000 in 2025 (or $8,000 if you’re 50 or older)—to a traditional IRA. - Convert to a Roth IRA
You then convert that contribution into a Roth IRA. Since the original contribution was made with after-tax dollars, and assuming no earnings have accrued yet, the conversion typically results in little to no tax.
What is a Roth IRA?
A Roth IRA is a retirement account where your money grows tax-free, and qualified withdrawals in retirement are also tax-free. Unlike traditional IRAs, there are no required Minimum Distributions (RMD) at age 73. These are huge benefits.
Caution: The Pro Rata Rule
If you have other pre-tax IRA funds (including SEP or Simple IRA), a portion of your conversion may be taxable. Consider rolling those funds into your practice 401(k) to avoid this issue.
A Backdoor Roth can be a smart, tax-savvy addition to your retirement plan—but it should align with your full financial picture. Need help, we’re here for you.