Backdoor Roth IRA

High earners who exceed Roth IRA income limits can use the Backdoor Roth IRA by contributing to a traditional IRA and immediately converting it, legally bypassing the $153,000 single income cap. For instance, a 45-year-old earning $200,000 can invest $7,000 annually with an 8% return, accumulating $200,000 tax-free by age 65. The Backdoor Roth is 100% effective for those without an after-tax 401(k) option, offering a simpler alternative to more complex conversions.