Case Study- Double Backdoor ROTH IRA Strategy

Written By D. Scott Bloom, CFP®

Total Roth Funding Opportunity: $32,000 within 1 week

Client Profile

  • Married couple, both age 57

  • No existing Traditional, SEP, or SIMPLE IRA balances

  • Both actively employed and contributing to employer retirement plans 

  • Modified Adjusted Gross Income (MAGI): $260,000

Objective

Efficiently fund Roth IRA assets despite income limitations by utilizing the Backdoor Roth strategy, maximizing tax diversification and long-term tax-free growth.

Strategy Overview

Because direct Roth IRA contributions are not permitted at your income level, the IRS allows a two-step alternative:

  1. Make non-deductible contributions to a Traditional IRA

  2. Convert those funds to a Roth IRA

When executed properly, this results in minimal or no tax liability.

Contribution Limits (Age 50+)

Tax Year Contribution per Spouse Household Total

2025 $8,000 $16,000

2026 $8,000 $16,000

Total Roth Funding Opportunity: $32,000 within 1 week

Execution Timeline

Phase 1: 2025 Contribution (Immediate)

  • Open Traditional IRA accounts (one per spouse)

  • Contribute $8,000 each, coded for 2025

  • Deadline: April 15, 2026

Phase 2: Immediate Conversion

  • Convert each Traditional IRA to Roth IRA

  • Execute within 1–2 days of funding

  • Goal: minimize taxable earnings

Phase 3: 2026 Contribution (Next Step)

  • Contribute $8,000 each for 2026

  • Convert immediately to Roth IRA

  • Deadline: April 15, 2027

Key Technical Rules

1. Pro-Rata Rule (Critical)

To ensure tax efficiency:

  • Maintain $0 balance across all Traditional, SEP, and SIMPLE IRAs

  • Measured as of December 31, 2026

Failure to do so may result in partial taxation of conversions

2. Timing Sensitivity

  • Convert funds quickly after contribution

  • Any growth between contribution and conversion = taxable income

3. Tax Reporting Requirements

Each spouse must file:

  • IRS Form 8606

This form:

  • Tracks after-tax contributions (basis)

  • Prevents double taxation

  • Documents Roth conversion activity

Compliance Note

The IRS permits this strategy under current law. While the “step transaction doctrine” is occasionally discussed in theory, the Backdoor Roth remains a widely accepted and commonly implemented planning strategy.

Strategic Value

  • Builds tax-free retirement assets

  • Reduces future Required Minimum Distribution (RMD) exposure

  • Enhances tax diversification alongside TSP assets

  • Creates flexibility for future income planning and estate transfer

WEalthetic Planning Perspective

This strategy represents a high-efficiency use of current tax law for high-income professionals. When combined with disciplined execution and proper reporting, it provides meaningful long-term value with minimal complexity.

Execution Checklist

For Each Spouse:

  • Open Traditional IRA

  • Contribute $8,000 (2025) before April 15, 2026

  • Convert to Roth IRA immediately

  • Contribute $8,000 (2026)

  • Convert immediately

  • Maintain $0 IRA balances by 12/31/2026

  • File Form 8606 for 2025 and 2026

Next Step

WEalthetic will coordinate account setup, contribution coding, conversion timing, and tax reporting alignment to ensure seamless execution.

DISCLAIMERS: Not investment advice. Not tax advice. Consult a tax professional or find a CERTIFIED FINANCIAL PLANNER® to work as your fiduciary.

WEalthetic Advisors, LLC
Holistic WealthCare™ for High-Performing Professionals
Registered in California. Registration does not imply a certain level of skill or training.

D. Scott Bloom, CFP® https://www.wealthetic.com