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The Secret to Tax-Free Growth: Mastering the 'Back Door Roth' for Physicians

Updated: Dec 5, 2023


Doctor smiling

Attention U.S. physicians! You're in a unique financial position, often facing higher tax brackets due to your income. Traditional retirement savings options might not always work in your favor, but there's a strategy that could – the 'Back Door Roth' IRA. It can be a savvy move for those looking to maximize their retirement savings. Let's explore how this can be a game-changer for your financial future.


Understanding Roth IRAs and Income Limits: Roth IRAs are attractive because of their tax-free growth and qualified withdrawals. However, direct contributions to a Roth IRA are income-restricted. In 2024, the ability to contribute begins to phase out at $146,000 for single filers and $230,000 for married couples filing jointly. This limitation often excludes high-earning professionals like physicians.

The 'Back Door Roth' Strategy Explained: Here's where the 'Back Door Roth' comes in. This strategy involves making a non-deductible contribution to a Traditional IRA, then converting that amount to a Roth IRA. This conversion allows your investments to grow tax-free and be withdrawn tax-free in retirement.

Hypothetical Example Traditional IRA vs. 'Back Door Roth' Conversion: Let's consider Dr. Smith, a 50-year-old physician earning $400,000 annually. She wants to save for retirement but is above the income limit for a direct Roth IRA contribution.

  • Scenario 1: Staying with a Traditional IRA

  • Dr. Smith contributes $6,000 annually to her Traditional IRA.

  • Assuming a 7% annual return, her account grows to $161,328.32 by age 65.

  • However, withdrawals are taxed as ordinary income. If her tax rate at retirement is 35%, her after-tax value is approximately $104,863.41.

  • Scenario 2: Utilizing the 'Back Door Roth'


Dr. Smith contributes $6,000 annually to her Traditional IRA and converts it to a Roth IRA.

  • With the same 7% return, her account also grows to $161,328.32 by age 65.

  • The difference? All withdrawals during retirement are tax-free, giving her the full $161,328.32.

This example illustrates the potential tax savings and benefits of the 'Back Door Roth' strategy, especially for high-income earners.

Navigating the Conversion Process: The conversion process involves a few steps and considerations:

  • Timing: The conversion should ideally be done soon after the Traditional IRA contribution to address any taxable earnings.

  • Pro-Rata Rule: If you have existing pre-tax dollars in IRAs, the pro-rata rule could complicate the tax situation. It's essential to understand how this impacts your conversion.

  • Legislative Changes: Be aware of any tax law changes that might affect this strategy.

The 'Back Door Roth' IRA can be a powerful tool for physicians seeking tax-efficient ways to grow their retirement savings. While it offers significant benefits, it's crucial to navigate the rules and potential complexities carefully. Consulting with a financial advisor can help you integrate this strategy effectively into your overall financial plan.




​The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.


Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.


​Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment, tax, or legal advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

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