I get this question all the time. From clients, peers, and I see it constantly online: “How do I do a backdoor Roth if I have a rollover IRA?”
That’s why I wanted to build a reference post that covers the mechanics, explains the biggest pitfall (the pro-rata rule), and walks through a real-world example, to show how investors can navigate this question with confidence.
If you're short on time — not everyone is up for 2,000 words on backdoor Roths — scroll to the bottom for the TL;DR cheat sheet with the key things you need to know.
When a Simple Backdoor Roth Gets Complicated
A dual-physician couple, both well into their careers, figured they had their retirement game dialed in. They were maxing out their 401(k)s, contributing to HSAs, and keeping cash flow optimized. Then a colleague mentioned a strategy they hadn’t explored: the backdoor Roth IRA.
It sounded perfect, a way to add tax-free growth on top of their already solid savings habits.
But there was one problem: a $100,000 rollover IRA from a previous employer plan, now sitting in a rollover IRA.
That one account? It could turn their simple Roth maneuver into a surprisingly costly move.
What’s a Backdoor Roth IRA?
A backdoor Roth IRA is a legal workaround for people who make too much to contribute directly to a Roth IRA.¹
Here’s how it works:
Contribute to a Traditional IRA — up to $7,000 per person in 2025 ($8,000 if you’re 50 or older). This contribution uses after-tax dollars, and you don’t get a tax deduction.
Convert that money to a Roth IRA — usually right away, before it has a chance to grow.
Because you’re contributing after-tax money, and not taking a deduction, converting it typically doesn’t create any additional tax. But that only works cleanly if you don’t have other pre-tax IRA balances hanging around (we’ll get to that next).
You can also make prior-year contributions until the tax filing deadline, typically April 15. That gives you flexibility while keeping the Roth door open.
¹ 2025 Roth IRA contribution limits begin phasing out at $146,000 (single) and $230,000 (joint). These thresholds adjust annually. See IRS Roth IRA limits for current guidelines.
The Catch: The Pro-Rata Rule
This is where most investors get tripped up.
If you have other IRAs with pre-tax money (like a rollover IRA from an old job) the IRS won’t let you just convert the $7,000 after-tax contribution and call it a day.
Instead, they look at all your IRAs combined.
That includes:
Traditional IRAs
SEP IRAs
SIMPLE IRAs
Even if only a small slice of your IRA money is after-tax, your Roth conversion gets spread proportionally across the total. That means a big chunk of your conversion may be taxed, even though the contribution itself was made with after-tax dollars.
Example of Pro-Rata Rule:
Let’s say you contribute $7,000 of after-tax money to a Traditional IRA. But you also have $100,000 in a rollover IRA from a prior employer.
In the IRS’s eyes, your total IRA balance is $107,000. That means only about 6.5% of your conversion would be tax-free, and the other 93.5% would be taxed as income.
This is what’s known as the pro-rata rule, and it’s one of the biggest roadblocks for investors trying to use the backdoor Roth strategy.
**Important Note **: The IRS calculates this per person, not per couple. Your spouse’s IRAs don’t affect your conversion, and vice versa. You must file IRS Form 8606 each year you make non-deductible contributions to track your basis and accurately calculate taxes owed on Roth conversions. Neglecting this can complicate future conversions or distributions and potentially trigger unnecessary taxes.
What to Do With That Rollover IRA
There are a few ways to clear the path for future backdoor Roth contributions, and each option comes with tradeoffs.
Option 1: Convert the Rollover IRA to Roth All at Once
Upside: Wipes the slate clean immediately
Downside: Triggers a large tax bill. For the $100,000 Rollover IRA example above it could be north of $30,000 depending on your tax bracket.
Option 2: Do a “Reverse Rollover” Into a 403(b) or 401(k)
Some workplace plans allow you to roll IRA funds back into the plan, often called a reverse rollover.
Upside: No tax bill, removes the rollover IRA from the pro-rata equation
Downside: Not all workplace plans allow it. Some people aren't thrilled with the investment options or expenses in their employer plan (though that is less common).
In many cases, rolling your IRA into a 403(b) or 401(k) is a clean and effective way to sidestep the pro-rata rule.
But sometimes, and I’ve seen this firsthand, the employer plan has limited fund choices, high internal costs, or just underperforms compared to the IRA. That can be a the twist. But 9 times out of 10 it still is worth accessing the backdoor roth opportunity even if you're not thrilled with the employer plan you are rolling back into.
Option 3: Convert Gradually Over Time
Upside: Spreads the tax burden
Downside: Pro-rata rule still applies until the IRA is fully converted, reducing efficiency of backdoor Roths in the meantime
Typically option 2 is ideal, but everyone's circumstances vary.
Why Reclaiming Roth Space Matters
Roth IRA contribution limits may be modest, but they’re powerful. They’re also use-it-or-lose-it.
Let’s say you contribute $7,000 per year for 20 years and earn a 7% annual return. That grows to over $300,000 of tax-free money in retirement. Double that if both spouses participate. The long-term benefit of tax free growth can still outweigh some short term drags.
And it’s not just about your retirement:
Roth IRAs are flexible — no required minimum distributions (RMDs), and qualified withdrawals are tax-free
They can be inherited — giving heirs 10 more years of tax-free growth
They give you income control in retirement — helping manage IRMAA brackets, capital gains thresholds, and more
Roth IRAs are more than just accounts. They’re tools for long-term planning.
When to Delay the Backdoor Roth
Even if the backdoor Roth IRA is a great long-term move, there are times when waiting is the smarter play:
Your 403(b) or 401(k) doesn’t accept roll-ins -If your employer plan won’t allow a reverse rollover, you may be stuck with your rollover IRA for now. That doesn’t mean the strategy is off the table forever, it just means you may need to wait for a job change or a new plan that allows it.
You can’t afford the tax bill this year - If converting your existing IRA balance would push you into a higher tax bracket (or just feels like too big a bite), you don’t have to rush. Consider spacing out conversions over a few years, or waiting until your income drops.
You expect a lower -income in the year ahead - Taking a sabbatical? Going part-time? Transitioning to retirement? These are often the best windows to do a clean Roth conversion, at a lower marginal tax rate, and tee up backdoor Roths moving forward.
You’re actively converting the IRA in stages - If you’ve already started converting a large IRA balance over time, doing a backdoor Roth mid-process may just create more pro-rata headaches. It can be cleaner to wait until the rollover IRA is fully converted (or removed via reverse rollover).
Tip: You can still make the IRA contribution now (especially for the prior year) and delay the conversion.
Do the Math, Know the Tradeoffs
There’s no one-size-fits-all answer when it comes to backdoor Roth IRAs, especially with a rollover IRA in the mix.
Maybe your employer plan doesn't allow reverse rollovers. Maybe the timing isn’t right. That’s okay.
The key is to do the math, understand your options, and avoid letting a single account block your long-term plan.
This isn’t about maximizing return in year one, it’s about building flexibility, reducing your future tax burden, and giving your money more room to grow tax free for as long as possible.
Always coordinate with your advisor and CPA to ensure your backdoor Roth contributions and conversions are handled correctly, and align with your broader financial picture.
TL;DR — Backdoor Roths & the Pro-Rata Rule
The strategy: A backdoor Roth IRA lets you contribute to a Roth even if your income is too high, by putting after-tax dollars into a traditional IRA and then converting it.
The catch: If you have pre-tax IRA money (like a rollover IRA), the pro-rata rule spreads the tax cost across all IRA balances — meaning your conversion may not be tax-free.
The rule applies per person, not per couple. Your spouse’s IRAs don’t affect your conversion or vice versa.
If you have a rollover IRA, here are your main options:
Convert it all at once (big tax hit now)
Roll it into a 403(b)/401(k) (avoids taxes; plan must accept roll-ins). Even if the plan has limited investment options, reclaiming Roth access is often still worth it over time.
Convert it gradually over time (spreads taxes, but pro-rata still applies until complete)
Can’t convert yet? Make the traditional IRA contribution now — even for the prior year — and convert later when the timing’s better.
Tax paperwork alert: You must file IRS Form 8606 annually to track your after-tax IRA contributions and document Roth conversions properly.
Why it matters: Roth IRAs grow tax-free, have no RMDs, and offer flexibility in retirement and legacy planning. Contribution space is use-it-or-lose-it.
Bottom line: Don’t let a rollover IRA derail your backdoor Roth plan. Know the rules, weigh the tradeoffs, and work with an advisor to get it right.
About the Author
Carson McLean, CFP® is the founder of Altruist Wealth Management, a flat-fee, fiduciary financial advisory firm serving clients virtually nationwide. He specializes in helping high-income professionals and dual-income households navigate complex retirement, tax, and investment decisions with clarity and confidence.
Disclosure: The information provided in this article is intended for educational purposes only and should not be construed as personalized financial advice. Please consult with a qualified financial advisor or tax professional to tailor strategies to your specific situation.