How does a backdoor Roth work?
Step-by-step, with the pro-rata trap.

Who needs the backdoor

Roth IRA direct contribution phase-outs for 2026 verify×DON'T TRUST, VERIFYClaim: 2026 Roth IRA MAGI phase-out: Single $153,000-$168,000, MFJ $242,000-$252,000.Verify at: IRS Roth IRA contribution limits ↗ Source 1 in the list belowPhase-outs indexed for inflation. The IRS publishes the official 2026 figures in its annual inflation-adjustment Rev. Proc.:

• Single: $153,000 to $168,000 (phase-out range)
• Head of household: $153,000–$168,000, the same range as single filers (the phase-out applies to single and head-of-household filers)^[2]
• Married filing jointly: $242,000 to $252,000
• Married filing separately if you lived with your spouse during the year: $0-10K

Annual IRA contribution limit, 2026: $7,500. $1,100 catch-up at 50+.^[2] Annual contribution and compensation rules still apply.

Above these limits, direct Roth contribution is not allowed. The backdoor route is always available, regardless of income.

The pro-rata rule, the trap most people hit

If you have any pre-tax IRA money (Traditional IRA, SEP IRA, SIMPLE IRA), the IRS treats ALL your IRAs as a single account for calculating the taxable portion of your conversion verify×DON'T TRUST, VERIFYClaim: The pro-rata rule applies across all traditional, SEP, and SIMPLE IRAs when calculating taxable portion of a Roth conversion.Verify at: Form 8606 instructions ↗ Source 2 in the list below401(k)s are excluded from the calculation, which is why the rollover fix works.. 401(k)s are excluded from the calculation, which is the workaround.

The actual Form 8606 calculation uses year-end IRA values and distributions, with its required adjustments.^[3] To run the split on your own balances, use the Backdoor Roth Pro-Rata Tax Calculator.

The fix

Roll your existing pre-tax Traditional IRA into your employer 401(k) plan if it accepts incoming rollovers. Most large-employer plans do. After that rollover, you have no pre-tax IRA money, the pro-rata rule does not apply to your backdoor conversion, and the backdoor works cleanly. Do this step first. Do not contribute to the Traditional IRA and then figure out the rollover later.

Two possible approaches have different costs and consequences. The 401(k) roll-in above is one. Or convert the entire deductible balance to Roth in a single year, paying the tax bill, then run the Backdoor cleanly thereafter.

Step-by-step at Fidelity

For the exact Fidelity menu paths, see Backdoor Roth IRA: Fidelity Walkthrough.

The general sequence is the same at Fidelity or Schwab. Open both a Traditional IRA and a Roth IRA at the same brokerage if you do not already have them. Funded by external bank transfer, the contribution typically settles in 1 to 5 business days. Once settled, request a "Roth conversion" from the Traditional IRA to the Roth IRA for the full balance.

Step 1: Contribute to Traditional IRA

• Log in to Fidelity. Open a Traditional IRA if you do not have one.
• Navigate to the Traditional IRA, click "Contribute."
• Amount: $7,500 (2026 limit under 50) or $8,600 (50+) verify×DON'T TRUST, VERIFYClaim: 2026 IRA contribution limits estimated at $7,500/$8,600. Confirm when IRS publishes final figures.Verify at: IRS IRA limits ↗ Source 4 in the list belowAnnually indexed for inflation..
• Select "Non-deductible" if prompted.
• Deductibility depends on workplace coverage, filing status and income, not income alone. If you make a nondeductible Traditional IRA contribution, report and track its basis. File Form 8606 each year to track basis.
• Keep the contribution in cash. Do NOT invest it before converting.
• Wait 1 to 3 business days for the contribution to settle.

Step 2: Convert to Roth IRA

• Open a Roth IRA at Fidelity if you do not have one.
• Navigate to your Traditional IRA, select "Convert to Roth IRA."
• Select the amount. Select destination Roth IRA. Confirm.

Within days (or sometimes the same business day) of the contribution settling, request a Roth conversionRoth conversionMoving eligible retirement money into a Roth account. Pre-tax amounts and earnings generally create taxable income; nondeductible basis is treated under the applicable aggregation rules. Conversions can affect tax brackets and income-based costs, and separate withdrawal rules apply.Full definition at your brokerage. Only the basis portion is nontaxable; IRA aggregation and any earnings can make part of the conversion taxable. Any minimal earnings in the brief settlement window are taxable, which is why most people convert immediately.

Step 3: Invest the converted funds

Now that the money is in the Roth IRA, invest per your plan. Index funds, target date funds, or whatever your allocation calls for.

Invest the converted balance in a total-market index fund (VTI, FSKAX, FZROX). Qualified Roth withdrawals are tax-free; separate rules apply to contributions, conversions and earnings. Repeat the entire process every year.

Step 4: Report on Form 8606

When you file your taxes: Form 8606 Part I reports the non-deductible contribution. Part II reports the conversion. This establishes your basis and prevents double taxation. Most tax software handles this if you correctly enter the 1099-R from the conversion and the Form 5498 from the contribution verify×DON'T TRUST, VERIFYClaim: Form 8606 Parts I and II are required to correctly report backdoor Roth contributions and conversions.Verify at: Form 8606 instructions ↗ Source 2 in the list belowMissing Form 8606 filings can lead to double taxation years later..

The 1099-R from the brokerage will show the conversion; combined with Form 8606, the IRS sees a contribution of $7,500 of basis, a conversion of roughly $7,500, and the taxable portion determined by the basis and aggregation rules, not automatically zero.

For a long-horizon Traditional balance and the broader conversion ladder strategy, see Roth Conversion Ladder.

Timing pitfalls

Mega Backdoor Roth

A separate, much larger strategy that runs through the 401(k), not the IRA. If your employer 401(k) plan allows after-tax (non-Roth) contributions and either in-service withdrawals or in-plan Roth conversions, you can push tens of thousands more dollars per year into Roth space.

The annual 415(c) total contribution limit (employee + employer + after-tax) is $72,000 for 2026. After your $24,500 employee deferral and your employer matchemployer matchAn employer contribution linked to qualifying employee contributions under a plan formula. Eligibility, vesting and plan terms determine what you receive and keep. The match ratio is not an annual investment return, and the invested balance can fall.Full definition, the leftover room can be filled with after-tax contributions, which then immediately convert to Roth. Many tech companies, large law firms, and major banks support this; ask HR if your plan documents allow "after-tax contributions" and "in-service Roth rollover."

For high earners with access, the Mega Backdoor is one of the most powerful tax-advantaged tools in the U.S. system. See Roth IRA and 401(k) for sequencing. The full mechanics are in The Mega Backdoor Roth: +$47,500 Roth.