Need to Know Tax › Retirement and seniors
Roth accounts
Roth IRAs and the backdoor Roth
For savers at any age, and especially for retirees in the years between leaving work and age 73. Pay the tax now, at a rate you choose, and never again. The rules are simple; the one that catches people is the pro-rata rule, and it catches them after the fact.
A traditional IRA gives you a deduction going in and taxes every dollar coming out. A Roth IRA is the reverse. Contributions are not deductible, but qualified withdrawals, including all the growth, are tax-free, and there are no required distributions during your lifetime. For a saver, the question is which tax rate is higher, today’s or retirement’s. For a retiree, the question is how much to convert each year, and the answer is set by lines on the return rather than by the account.
| Contribution limit (traditional and Roth combined) | $7,500 |
| Catch-up at 50 or older | $1,100 |
| Contribution phases out, single | $153,000 – $168,000 |
| Contribution phases out, married filing jointly | $242,000 – $252,000 |
| Income limit on conversions | None |
| Required distributions in your lifetime | None |
| Deadline for a 2026 contribution | April 15, 2027 |
The limits
The contribution limit is $7,500 for 2026, plus a catch-up of $1,100 at age 50 or older. That is a combined limit for traditional and Roth IRAs together, and you need earned income from work to contribute at all; a retiree with only pension and investment income cannot contribute, though a working spouse’s income can support a contribution for a non-working one. The ability to contribute to a Roth phases out at higher incomes: between $153,000 and $168,000 of modified AGI for single filers, and between $242,000 and $252,000 for married couples filing jointly. Above the top of the range, no direct Roth contribution is allowed.
The backdoor
There is no income limit on converting a traditional IRA to a Roth. Anyone can do it, at any income; the converted amount is simply taxed as income in the year of conversion. That gap is the “backdoor Roth.” A high earner makes a non-deductible contribution to a traditional IRA, then converts it to a Roth. Because the contribution was already taxed, the conversion of it is mostly tax-free, and the money is in a Roth that the income limit was supposed to keep it out of. Done cleanly, it is two transactions a few days apart and a Form 8606.
The pro-rata rule
This is where it goes wrong. If you have any other pre-tax IRA money, in a traditional, SEP, SIMPLE or rollover IRA, part of every conversion is taxable. The IRS treats all your IRAs as one pot on December 31 of the conversion year and taxes the conversion in proportion to the pre-tax share of the pot. Form 8606 tracks the non-deductible basis year after year (verify); lose the form and the basis is lost with it.
Worked example: two backdoor Roths, one of them a trap
Each person earns too much to contribute to a Roth directly, puts $7,500 into a traditional IRA without deducting it, and converts it to a Roth a week later.
| Maria: no other IRAs | David: a $300,000 rollover IRA | |
|---|---|---|
| Non-deductible contribution (basis) | $7,500 | $7,500 |
| All IRA balances on December 31 | $0 after the conversion | $300,000 |
| Pre-tax share of the pot | 0% | $300,000 ÷ $307,500 = 97.6% |
| Taxable part of the $7,500 conversion | $0 | $7,317 |
| Federal tax at 32% | $0 | $2,341 |
| Basis left behind in the rollover IRA | — | $7,317, recoverable only slowly over future withdrawals |
David’s fix, had he asked first: roll the $300,000 into his current employer’s 401(k) before December 31, which takes it out of the IRA pot, then convert. The rule looks at the balance at year end, not on the day of the conversion.
Conversions in retirement
For retirees the backdoor is beside the point; the conversion itself is the tool. Money converted to a Roth in your 60s is taxed then, at rates you choose, and never has a required minimum distribution. Retirees who convert steadily between retiring and 73, filling the 12% or 22% bracket each year, often cut their lifetime tax and their survivor’s, since a surviving spouse files single at half the bracket widths.
Two cautions. A conversion raises income for the Medicare IRMAA test two years later, and one dollar over a line triggers the whole surcharge tier; conversions are sized to land under the lines, $109,000 single and $218,000 joint for 2026. And the tax on a conversion should be paid from other money, not from the converted amount, or the Roth starts smaller than it should and, before 59½, the withheld part is an early withdrawal with a penalty.
Worked example: filling the 12% bracket for six years
A married couple, both 66, retired, with $45,000 of Social Security and $20,000 of pension, and $600,000 in traditional IRAs. Social Security will not start being taxed in earnest until the conversions begin, so the example shows the all-in cost.
| No conversions | Convert $60,000 a year, ages 66–72 | |
|---|---|---|
| Taxable Social Security | about $5,250 | $38,250 (the 85% ceiling) |
| Adjusted gross income | $25,250 | $118,250 |
| Standard deduction with age, plus senior deduction | $47,500 | $47,500 |
| Taxable income | $0 | $70,750 (12% bracket ends at $100,800) |
| Federal tax each year | $0 | about $7,990, 13.3% of the amount converted |
| Colorado tax each year | $0 | about $1,200 after the Colorado subtractions |
| IRA balance at 73, roughly (5% growth) | $845,000, RMD about $31,900 and rising | $350,000 in the IRA, $480,000 in Roths; RMD about $13,200 |
Rounded and simplified. Seven years of conversions cost about $63,000 of tax at an average 15% all-in. Left alone, the IRA’s RMDs at 73 and beyond land on top of fully taxable Social Security in the 22% bracket, and on a single survivor at worse rates still. Both columns stay under the $218,000 IRMAA line throughout.
The five-year rules
There are two, and they are different. Earnings come out tax-free only if the Roth has been open five years and you are 59½ or older (or disabled, or buying a first home). Separately, each conversion has its own five-year clock before the converted amount can be withdrawn without a 10% penalty, if you are under 59½. At 59½ and older with any Roth open five years, both clocks are satisfied and everything is tax-free. Contributions themselves can always come out tax-free, at any age, since they were taxed going in.
Behind the scenes
A backdoor Roth arrives on a preparer’s desk as two forms that look like bad news: a Form 5498 showing a traditional IRA contribution the client cannot deduct, and a 1099-R showing a taxable distribution of the same amount. Entered as the forms read, the client pays tax twice. The preparer records the non-deductible contribution on Form 8606, carries the basis forward, and reports the conversion against it, so that the taxable amount comes out near zero. If the pro-rata rule applies, the computation is done before the conversion, not after, and the usual answer is to move the pre-tax money into a 401(k) first.
The Colorado side
A conversion is a taxable IRA distribution, so it counts as retirement income for Colorado’s subtraction: up to $24,000 per person at 65 or older, $20,000 at 55 to 64, after Social Security has used its share. Whatever room is left under the cap after Social Security shelters that much of the conversion from Colorado tax, which is why the example above owes the state about $1,200 on a $60,000 conversion rather than $2,640. Two cautions: a conversion raises AGI, which matters for anyone 55 to 64 near the $75,000 / $95,000 line for the Social Security subtraction, and for anyone near $300,000 where the deduction addback begins. Qualified Roth withdrawals later are not Colorado income and do not use up the subtraction.
What to bring your preparer
- Form 5498 for every IRA, showing contributions and the December 31 balance
- Form 1099-R for any conversion, with the code in box 7
- Last year’s Form 8606, or the whole prior return, so the basis carries forward
- A note of whether the IRA contribution was meant to be deductible or not
- For a planned conversion: this year’s expected income, both ages, and whether either of you is on Medicare or within two years of it
- For a backdoor Roth: whether you have any other traditional, SEP, SIMPLE or rollover IRA anywhere
Questions people ask
I earn too much for a Roth. Is the backdoor legal?
Yes. The IRS has acknowledged it, and Congress has declined to close it. It is a non-deductible contribution followed by a conversion, both of which are allowed at any income.
Can I undo a conversion if the market drops?
No. Recharacterizing a conversion has not been allowed since 2018. Converting in two or three pieces through the year spreads that risk.
I’m 70. Is it too late to convert?
No. Conversions are allowed at any age. Once RMDs begin at 73, the RMD must be taken first and cannot itself be converted, but anything above it can be. The years from retirement to 73 are the widest window.
Should I convert everything at once to get it over with?
Rarely. A large conversion is taxed in the higher brackets and trips the IRMAA tiers. Converting a slice each year, sized to the top of a bracket and under the Medicare line, almost always costs less.
Can my 401(k) do a Roth conversion?
Many plans allow an in-plan conversion to a Roth 401(k), and since 2026 the catch-up contributions of higher earners must go Roth anyway. The plan’s rules govern; ask the administrator.
I’m retired with no wages. Can I still put money into a Roth?
Not by contribution; a contribution requires earned income, and pensions, Social Security, interest and IRA withdrawals do not count. A conversion has no earned-income requirement, which is why retirees convert rather than contribute. One exception on the contribution side: a working spouse’s wages can fund a Roth for a spouse who has none (a spousal IRA). The 2026 limit is $7,500, or $8,600 with the $1,100 catch-up at 50 and older, across all of your IRAs together.
I contributed to a Roth and then found out my income was too high. Now what?
That is an excess contribution, and it owes a 6% excise tax (Form 5329) for every year it stays in the account. Withdraw the excess plus its earnings by the due date of the return, including extensions, and there is no 6% tax; only the earnings are taxed, with a 10% penalty on them if you are under 59½. Or ask the custodian to recharacterize it as a traditional IRA contribution by the same deadline and, if you have no other pre-tax IRA money, convert it: the backdoor Roth after the fact.
The custodian’s form doesn’t match what I did. Does it matter?
Yes. Form 5498 reports contributions (box 10 for Roth) and conversions (box 3), and the 1099-R codes the distribution side. Custodians miscode these more often than you would expect, and the IRS matches the forms. Check them against what you actually did before the return is filed, and have the custodian correct the form rather than explaining it away on the return.
Do the pro-rata math before the conversion, not after
A backdoor Roth is two forms that look like bad news on a preparer’s desk. Whether they are depends on what else is in your IRAs on December 31, and that is a question for October.