Retirement-saving strategy in which a saver funds a traditional IRA and then converts it to a Roth IRA when direct Roth contributions are limited.
A backdoor Roth IRA is a retirement-saving strategy in which someone contributes to a traditional IRA and then converts those assets to a Roth IRA.
The strategy is usually discussed when direct Roth IRA contributions are restricted or phased out by income.
The backdoor Roth strategy matters because some savers want Roth treatment even when the direct contribution path is limited.
it creates an indirect route into Roth assets
it can increase tax flexibility later in retirement
it can produce unexpected tax issues when other pre-tax IRAs exist
That last point is why the strategy is often discussed together with pro-rata tax treatment rather than as a simple loophole.
Roth IRA: Final destination account in the strategy.
Traditional IRA: Account typically used as the contribution and conversion entry point.
5-Year Rule for IRAs: Timing rule that can matter after Roth conversion.
Retirement Planning: Broader framework for deciding whether the strategy fits a household tax plan.