The Backdoor Roth IRA for Physicians (and the One Mistake to Avoid)

Most physicians earn too much to contribute to a Roth IRA directly — the income limits phase you out. But the "backdoor Roth" remains a completely legitimate, widely used way to get money into a Roth every year. It's simple in concept, with one trap that catches a lot of doctors.

The Two Steps

First, you make a non-deductible contribution to a traditional IRA (there's no income limit on this). Second, you convert that traditional IRA to a Roth IRA. Because the contribution was already after-tax, the conversion is generally tax-free, and the money then grows tax-free in the Roth. Done annually, it's a reliable way to build a meaningful tax-free bucket over a career.

The Pro-Rata Pitfall

Here's the mistake: if you have other pre-tax money sitting in traditional, SEP, or SIMPLE IRAs, the IRS "pro-rata rule" means your conversion won't be tax-free — it'll be partly taxable, calculated across all your IRA balances. Many physicians with an old rollover IRA get surprised by a tax bill. The fix is usually to roll those pre-tax IRA funds into a 401(k) first (if your plan allows), clearing the way for a clean backdoor Roth.

It's a small maneuver with a big long-term payoff — worth getting the sequencing right.

Tax Planning for Physicians

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General educational information, not tax advice. The pro-rata rule and conversion mechanics depend on your specific accounts — consult a qualified advisor.