Backdoor Roth IRA: What Lawyers Need to Know

If you’re a lawyer reading a personal finance blog, I’m going to assume that you are already maxing out your 401(k).

That’s a good start.

But, if you’re interested in financial independence, you need to be doing more.

For high earners who read personal finance blogs, maxing out a 401(k) plan is just the beginning.

On top of maxing out a 401(k) plan, I recommend lawyers also max out an HSA.

Maxing out a 401(k) and HSA is a powerful combination.

But, you can still do more.

The reality is there are only so many tax-advantaged investment account types that you can contribute to. It’s important to take advantage of these accounts whenever possible.

So, once you’ve maxed out both your 401(k) and HSA, the next step is to consider maxing out a Roth IRA.

When you can fully fund each of these three accounts, you’re well on your way to financial independence.

Now before you tune out because you don’t make enough money to contribute to all three accounts, hear me out.

If you follow a traditional career trajectory for a lawyer, you will earn more money in the future.

When you do, you want to know what to do with that additional cash so it doesn’t go to waste, like contributing to a Roth IRA.

The thing is, there’s a catch that all lawyers need to know about when it comes to earning a good income and benefiting from Roth IRAs.

That’s what we’re going to explore today.

There’s a catch when it comes to high earners funding a Roth IRA.

When it comes to contributing to a Roth IRA, there’s a catch that high earners need to be aware of.

Because of the amazing tax advantages, there are income limits associated with who may contribute to a Roth IRA. More on these limits below.

My assumption is that if you earn enough money to max out a 401(k) and HSA, and still have funds available for a Roth IRA, you likely exceed these income limits.

Today, we’ll talk about the common strategy that high earners use to get around these income limits. The strategy is known as a “Backdoor Roth IRA conversion.”

With many lawyers earning raises and bonuses towards year-end, this is the perfect time to consider a Backdoor Roth conversion.

The last thing you want to happen is for that extra, hard-earned money to go to waste.

Plus, if you prioritized other financial goals earlier in the year, it’s not too late to circle back to your retirement planning goals, like maxing out a Roth IRA.

Before we talk about the Backdoor Roth IRA, let’s take a look at why you should consider investing in a Roth IRA in the first place.

A Roth IRA provides double tax benefits.

A Roth IRA is a type of retirement account that provides double tax benefits. 

The first major tax benefit is that you don’t have to pay any taxes when you withdraw from a Roth IRA (after age 59 1/2). This is the most notable advantage of investing in a Roth IRA.

The second major tax benefit of investing in a Roth IRA is that, just like a 401(k), your earnings grow tax-free. That means more investment growth through the magic of compound interest.

The combination of tax-free withdrawals and tax-free growth means double tax benefits. This is why so many savvy investors, who can afford to do so, choose to max out their Roth IRA.

The key difference from a 401(k) or traditional IRA is that you make after-tax contributions to a Roth IRA.

With a Roth IRA, you make after-tax contributions. That means you don’t get any immediate tax breaks, unlike when you contribute to a 401(k).

Even so, the two major tax benefits we just discussed make it extremely valuable to contribute to a Roth IRA.

What does it mean to make after-tax contributions to a Roth IRA?

Typically, a lawyer paid as a W-2 employee will fund a Roth IRA with money that gets deposited into his checking account from his paycheck.

That means he already paid taxes on that income through withholdings on his paycheck. So, the money that gets deposited into his checking account is considered “after-tax” money.

Once that money hits his checking account, he gets to decide what to do with it.

The basic decision is pretty simple: he can spend the money or he can save it.

If he chooses to save the money, investing in a Roth IRA is one of the best ways to do it.

Why lawyers should open a Roth IRA besides the double tax benefits.

For a number of reasons, it’s a good idea for every lawyer to consider funding a Roth IRA in addition to his 401(k).

For starters, there are contribution limits to funding employer-sponsored retirement accounts, like a 401(k).

Essentially, you may need more money in retirement than just what your 401(k) plan will provide. Investing in a Roth IRA at the same time is a way to boost your retirement income.

For another reason, 401(k) plans and Roth IRAs are treated differently from a tax perspective, as we just discussed. 

Many retirees like having a Roth IRA in addition to their 401(k) so they have access to some tax-free money in retirement.

Include me in this camp. I agree that it is beneficial to have some tax-free income in retirement from a Roth IRA to go along with your taxable income from a 401(k).

Finally, Roth IRAs also provide better flexibility for when you have to withdraw your money and how you can pass your funds onto your heirs.

For example, you can withdraw your Roth IRA contributions tax-free and penalty-free at any time. This flexibility is a huge advantage of a Roth IRA.

Note: There are penalties if you make withdrawals from your earnings before the age of 59 1/2.

For another example, unlike traditional IRAs, Roth IRAs don’t have required minimum distributions (RMDs).

Add all these benefits together and you’ll see why so many lawyers choose to fund a Roth IRA.

Roth IRA contribution and income limits.

As with other tax-advantaged retirement accounts, like a 401(k), there are annual contribution limits for Roth IRAs.

Recently, the IRS raised the 2026 annual contribution limits for Roth IRAs to $7,500, up from $7,000 in 2025. The IRA “catch-up” contribution limit also increased to $1,100 in 2026.

Pertinent for today’s conversation, there are also income limits for contributing to a Roth IRA.

As explained by the IRS:

The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $153,000 and $168,000 for singles and heads of household, up from between $150,000 and $165,000 for 2025. 

For married couples filing jointly, the income phase-out range is increased to between $242,000 and $252,000, up from between $236,000 and $246,000 for 2025. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

As a lawyer, there’s a good chance you exceed these income limits. If you’re not there already, you soon will if you follow a typical career trajectory.

That’s where the Backdoor Roth IRA strategy comes into play.

What is a Backdoor Roth IRA?

“Backdoor Roth IRA” describes a strategy used by lawyers and other high-income earners who can’t contribute to a Roth IRA because their income is too high.

Because high-income earners are not permitted to contribute directly to a Roth IRA, this strategy involves contributing to a traditional IRA and then converting it to a Roth.

Even though the name implies you’re doing something sneaky, Backdoor Roth IRA conversions are completely permissible.

In fact, every major financial institution, like Vanguard, Fidelity, and Charles Schwab, has a step-by-step guide on how to perform a Backdoor Roth conversion on its website.

The Back Door IRA process involves two steps.

Step 1: Make a nondeductible contribution to a traditional IRA. That means you don’t get an upfront tax break.

Step 2: Convert that contribution to a Roth IRA.

That’s all there is to it. You can perform the conversion yourself through your investment platform. I personally use Vanguard.

Notably, there are no income limits for converting a traditional IRA to a Roth IRA.

And, since the initial contribution is made with after-tax dollars, when executed properly, you shouldn’t owe additional taxes on the conversion.

This process is easier than it sounds. Just be sure to precisely follow the step-by-step guides offered by the financial institution that you invest with.

Finally, as always, be sure to check with your tax advisor or financial advisor before performing a Backdoor Roth conversion.

Do you take advantage of a Backdoor Roth IRA?

Maxing out your 401(k) is a good start.

Maxing out your 401(k) and HSA is even better.

If you also max out your Roth IRA, whether directly or through a Backdoor Roth conversion, that’s next level.

As a lawyer earning a high income, there’s really no excuse for not maxing out each of these three accounts.

If you make good money and are falling short, you should revisit your budget. You also should spend some time thinking about what financial independence might mean for you and your family.

The end of the year and the holiday season are great times to think and make adjustments to move you closer to financial freedom.

What do you think of the Backdoor Roth?

Have you contributed through the backdoor in the past?

Planning to contribute again this year?

Let us know in the comments below.