The Backdoor Roth IRA for Physicians: What It Is and How to Do It

By Jeremyi R. Sanchez, CFP®, RICP® | Westmark Wealth Management

Most attending physicians spend their first year out of residency doing two things financially: catching up on student loans and figuring out where to put the rest of their income. The Roth IRA rarely comes up — because most advisors assume you make too much to contribute.

They are right that you cannot contribute directly. But there is a legal workaround that every physician should know about, and most do not.

The IRS sets income limits on direct Roth IRA contributions. In 2026, the ability to contribute phases out starting at $150,000 for single filers and $236,000 for married filing jointly — and is eliminated entirely above $165,000 single and $246,000 married. Most attending physicians exceed these limits within their first year out of residency.

But the income limit applies only to direct Roth IRA contributions. It does not apply to Roth conversions. And that distinction is the entire basis of the Backdoor Roth IRA — a completely legal strategy that lets high-income physicians access one of the most powerful tax-free retirement accounts available.

At Westmark Wealth Management, we work with physicians across the country as a dedicated financial advisor for doctors navigating exactly these kinds of tax and retirement planning decisions. Here is everything you need to know about the Backdoor Roth.

Why a Roth IRA Is Worth the Effort

Before getting into the mechanics, it is worth understanding why the Roth IRA is so valuable for physicians specifically.

Money in a Roth IRA grows tax-free. You contribute after-tax dollars, and when you withdraw in retirement — the contributions and all the growth — you pay zero taxes. No required minimum distributions. No tax exposure on dividends, capital gains, or interest earned inside the account over decades of growth.

For a physician in the 32% to 37% federal tax bracket, that tax-free growth is extraordinarily valuable. A $7,500 contribution today, growing at 7% annually for 30 years, becomes approximately $57,000 — all of it tax-free at withdrawal.

Multiply that by 20 or 25 years of consistent contributions and the Roth IRA becomes a significant tax-free asset in retirement, giving you flexibility to manage your taxable income and reduce your Medicare surcharges (IRMAA) in your later years.

Physician retirement planning involves more complexity than most financial plans — high income, delayed savings start, student debt, and peak earning years compressed into a shorter runway. The Backdoor Roth is one of the most effective tools available to close that gap. That is why it is worth doing even when it requires a workaround.

It is also worth noting that Roth conversions are commonly done near retirement — but that timing comes with real costs. Converting a large pre-tax IRA balance in your 60s means recognizing that income in a single tax year, often at your highest marginal rate. It can also trigger Medicare IRMAA surcharges, increase the taxable portion of your Social Security benefits, and affect your eligibility for other income-based programs. The Backdoor Roth sidesteps all of that by building tax-free wealth incrementally, while your balance is small and the tax cost is minimal. Doing it consistently throughout your career is almost always more efficient than trying to convert your way out of a large pre-tax balance later.

What Is the Backdoor Roth IRA?

The Backdoor Roth IRA is a two-step process:

Step 1: Make a non-deductible contribution to a traditional IRA. Step 2: Convert that traditional IRA to a Roth IRA.

Because there is no income limit on conversions — only on direct contributions — high-income physicians can use this path to fund a Roth IRA every year regardless of income.

The IRS has been aware of this strategy since it emerged and has not moved to prohibit it. In fact, Congress has repeatedly considered and declined to close this loophole. It is a legitimate, widely-used strategy recommended by financial planners and CPAs nationwide — and a core part of physician wealth management planning at peak income years.

The Pro-Rata Rule: The Most Important Thing to Understand

Before you execute a Backdoor Roth, you must understand the pro-rata rule — because getting this wrong can result in an unexpected tax bill.

The pro-rata rule says that when you convert a traditional IRA to a Roth IRA, the IRS treats all of your traditional IRA assets as a single pool. The taxable portion of your conversion is determined proportionally based on how much pre-tax money exists across all your traditional IRAs.

Here is an example:

Suppose you have $93,500 in a traditional IRA from a previous employer rollover (pre-tax money), and you make a new $7,500 non-deductible contribution (after-tax money). Your total traditional IRA balance is now $101,000.

When you convert $7,500 to a Roth IRA, the IRS does not treat that $7,500 as entirely after-tax. It treats your conversion as coming proportionally from the whole pool:

• After-tax percentage: $7,500 / $101,000 = 7.4%
• Taxable portion of conversion: 92.6% of $7,500 = approximately $6,945

You would owe income tax on $6,945 at your marginal rate — defeating most of the benefit.

The solution: The Backdoor Roth IRA works cleanly only when you have zero pre-tax money in traditional IRAs at year-end. If you have a rollover IRA, SEP-IRA, or SIMPLE IRA with pre-tax dollars, you need a plan to address it first.

The most common solution for physicians with a rollover IRA is to roll it into your current employer's 401(k) or 403(b) plan — most plans accept incoming rollovers. Once the pre-tax money is out of your IRAs and into your employer plan, the pro-rata calculation is clean and the Backdoor Roth works as intended.

This is one of the most common planning mistakes we see when physicians come to us after managing their finances on their own. A financial advisor for physicians who understands these mechanics can help you avoid a costly surprise at tax time.

Step-by-Step: How to Execute the Backdoor Roth IRA

Step 1 — Check Your Traditional IRA Balance

Log in to every IRA account you hold (traditional, rollover, SEP, SIMPLE). Add up the total pre-tax balance across all accounts.

If the total is zero, proceed to Step 2. If you have pre-tax IRA money, contact your employer's HR or plan administrator to ask whether your 401(k) or 403(b) accepts incoming rollovers. Roll the pre-tax money into your employer plan before proceeding, and confirm the rollover is complete before year-end.

Step 2 — Open a Traditional IRA (If You Don't Have One)

You need a traditional IRA account to receive your non-deductible contribution. Most major custodians — Fidelity, Schwab, Vanguard — make this straightforward to open online.

If you already have a traditional IRA that is empty (zero balance), you can use that account.

Step 3 — Make Your Non-Deductible Traditional IRA Contribution

Contribute $7,500 to your traditional IRA for 2026 ($8,500 if you are age 50 or older). This is the annual IRA contribution limit.

Important: Do not invest the money in the traditional IRA once it arrives. Leave it in cash (a money market fund is fine). You will be converting it shortly, and investing it first can create a small taxable gain that complicates the conversion.

You have until the tax filing deadline (typically April 15 of the following year) to make your contribution for the current tax year — but contributing early in the year gives your money more time to grow in the Roth.

Step 4 — Convert the Traditional IRA to a Roth IRA

Log in to your custodian's website and initiate a Roth conversion for the full balance. Most custodians have a straightforward online conversion process.

Convert the entire balance — not just $7,500. If there is a small amount of interest earned in the traditional IRA, convert that too, so the account balance reaches zero. Any amount left in the traditional IRA could create a pro-rata issue in future years.

Step 5 — Invest the Funds in Your Roth IRA

Once the conversion is complete and the money appears in your Roth IRA, invest it according to your overall investment strategy. At this point the money is in a tax-free account and you want it invested and growing.

Step 6 — File IRS Form 8606

This is the step most people miss — and skipping it can create tax problems down the road.

IRS Form 8606 documents your non-deductible traditional IRA contribution and keeps a running record of your after-tax IRA basis. Without it, the IRS has no record that you already paid tax on this money, and you could be taxed again on it at withdrawal.

Your CPA or tax preparer should file Form 8606 automatically as part of your annual tax return. If you prepare your own taxes, make sure this form is included. Ask your CPA explicitly to confirm it was filed.

Spousal Backdoor Roth

If you are married and your spouse has earned income (or if you file jointly and you have earned income), your spouse can also execute a Backdoor Roth IRA using their own separate IRA account. That doubles your annual Roth contribution to $15,000 per year (or $17,000 if both spouses are 50+).

Each spouse must have their own separate IRA account — you cannot combine them. And the pro-rata rule applies separately to each spouse's IRA accounts.

Common Mistakes to Avoid

Leaving pre-tax money in a traditional IRA: As explained above, this triggers the pro-rata rule and creates a taxable conversion. Address rollover IRAs before executing the Backdoor Roth.

Investing in the traditional IRA before converting: A small gain on the investment is taxable at conversion. Keep the money in cash until you move it to the Roth.

Waiting until April to contribute and convert: You can contribute for the prior tax year until April 15, but if you convert after January 1 of the new year, the conversion counts for the new tax year. Timing matters — talk to your CPA about the cleanest approach for your situation.

Not filing Form 8606: Without this form, you may be double-taxed on money you already paid tax on. Confirm with your CPA every year that it is filed.

Assuming your employer plan accepts rollovers: Not all 401(k) and 403(b) plans accept incoming rollovers from IRAs. Confirm with your plan administrator before assuming this solution is available to you.

What About the Mega Backdoor Roth?

If your employer's 401(k) plan allows after-tax contributions and in-service withdrawals or in-plan Roth conversions, you may be able to contribute significantly more to a Roth account through what is called the Mega Backdoor Roth — potentially an additional $30,000 or more per year beyond the standard Backdoor Roth.

This strategy is more complex and not available in every plan, but it is worth exploring if you are maximizing all other tax-advantaged options. Ask your plan administrator whether your plan allows after-tax contributions and in-service Roth conversions.

Is the Backdoor Roth Right for You?

For most practicing physicians — especially those in peak earning years in the 32% to 37% tax bracket — the Backdoor Roth IRA is one of the best available tools for building tax-free retirement wealth. The $7,500 annual contribution may seem modest given a physician's attending salary, but over a 20-year career it compounds into a meaningful tax-free asset.

It works best when:

• You have no pre-tax money sitting in traditional IRAs, or you can move it to an employer plan
• Your CPA is comfortable filing Form 8606 correctly
• You execute it consistently every year, not just once

If you are unsure whether the Backdoor Roth makes sense for your situation — or if you have rollover IRAs that complicate the picture — that is exactly the kind of question a wealth management advisor for physicians should help you think through as part of your overall plan.

At Westmark Wealth Management, we specialize in financial planning for doctors and high-income professionals, helping physicians build comprehensive plans that incorporate tax-efficient strategies like the Backdoor Roth alongside retirement planning, investment management, and income protection. Schedule a complimentary consultation to talk through your specific situation.

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Westmark Wealth Management is a fiduciary financial planning firm specializing in serving physicians, dentists, attorneys, and other high-earning professionals. Available nationwide. This content is for educational purposes only and does not constitute tax or legal advice. Please consult your CPA or tax advisor regarding your specific situation.