Tax concepts//45s
What people mean by a backdoor Roth.
A nondeductible IRA contribution converted to a Roth, used by people who earn too much to put money into a Roth IRA directly. The limits and the pro-rata rule are where it gets tricky.
Transcript
This is called the backdoor Roth. You make a contribution to a traditional IRA and then, without waiting for the value to change, convert it to a Roth IRA.
This matters for high-income professionals who phase out of direct Roth IRA contributions. Above a certain income, around two hundred thousand for a household or one hundred fifty thousand single in recent years, you cannot contribute to a Roth directly. So you make the traditional contribution and convert it. At retirement it comes out tax-free, subject to the rules.
This is one of the tools high earners use. It is simple to execute and can be done every year up to the annual maximum. The pro-rata rule and existing pre-tax IRA balances are where it gets complicated, so it is worth understanding before you start.
These are transcripts of short educational videos Malik published on his own social profiles, edited for readability and to remove phrasing that could read as a personal recommendation. They are general education and marketing, not tax, legal, or investment advice, and not a recommendation to buy, sell, exercise, donate, hedge, or hold any security or to use any account, plan, or strategy. Contribution limits, phase-outs, and tax treatment change and depend on your facts. Talk with your own tax, legal, and advisory professionals before acting.