Backdoor Roth IRA vs. Roth Conversion vs. Regular Roth Contribution: What’s the Difference?

When building a long-term retirement plan, Roth IRAs are often part of the conversation due to their tax-free growth and tax-free qualified withdrawals. But there are multiple ways to get money into a Roth IRA—and they are not all the same.

Let’s break down three distinct strategies:

1. Backdoor Roth IRA Conversion

2. Regular Roth IRA Conversion

3. Regular Roth IRA Contribution

While all three result in money inside a Roth IRA, the source of the funds and the tax implications are very different.

1. Backdoor Roth IRA Conversion

This strategy is used by high-income earners who are not eligible to contribute directly to a Roth IRA due to IRS income limits.

How it works:

• You make a non-deductible (after-tax) contribution to a Traditional IRA.

• You then convert those funds to a Roth IRA—usually soon after the initial contribution.

Why it’s used: To legally "work around" to income limits that restrict direct Roth contributions.

Key tax note: If you don’t have other pre-tax IRA funds, the conversion may be mostly tax-free. But the IRS's pro-rata rule applies if you do.

2. Regular Roth IRA Conversion

A regular conversion involves moving pre-tax retirement savings—typically from a Traditional IRA or a qualified plan like a 401(k)—into a Roth IRA.

Why people convert:

• To take advantage of a lower income tax year.

• To minimize future required minimum distributions (RMDs).

• To allow funds to grow tax-free going forward.

Key tax note: The amount converted is included in your taxable income in the year of conversion.

3. Regular Roth IRA Contribution

This is the most straightforward method—if you qualify.

How it works:

• You contribute funds (up to the annual IRS limit) directly to a Roth IRA.

• These contributions are made with after-tax dollars and are not tax-deductible.

Eligibility rules:

• You must have earned income.

• Your Modified Adjusted Gross Income (MAGI) must be below IRS thresholds:

  • For 2025, phaseouts start at $146,000 for single filers and $230,000 for married couples filing jointly (limits may vary by year).

Contribution limits (2025):

• $7,000 if under age 50

• $8,000 if age 50 or older (includes a $1,000 catch-up)

Roth IRA Contribution vs. Conversion: What's the Difference?

Feature	Contribution	Conversion
Source of funds	Current earned income (after-tax)	Pre-tax or after-tax retirement funds
Income limits apply?	Yes	No
Annual limit?	Yes – capped by IRS limits	No – you can convert any amount
Tax due at time of action	No (already taxed)	Yes, if pre-tax funds are converted
Best for	Those under income limits with wages	Those doing tax planning or over income limits

Summary

Strategy	Income Limits?	Tax Due?	Annual Cap?	Ideal For...
Backdoor Roth Conversion	Used to bypass	Maybe (pro-rata)	Indirectly	High earners over income limits
Regular Roth Conversion	No	Yes	No	Strategic tax planning (e.g., retirees)
Roth Contribution	Yes	No (after-tax)	Yes	Eligible earners below income limits

Final Thoughts

Each of these Roth IRA funding strategies serves a different purpose depending on your income, age, retirement timeline, and tax planning goals. Understanding the distinctions can help you make informed decisions about which method aligns with your overall financial strategy.

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At Rigden Capital Strategies, we specialize in comprehensive wealth management and financial planning. As a fee-only fiduciary firm, we are committed to acting in our clients' best interests, providing objective advice without commissions or proprietary products. Our investment philosophy combines active and passive management to optimize portfolio performance while managing risk. We build lasting relationships by delivering customized strategies that evolve with our clients' needs.

Disclosure: This content is for informational and educational purposes only and should not be interpreted as financial, legal, or tax advice. While we strive for accuracy, we do not guarantee the completeness or reliability of the information provided. Investment decisions should be based on individual circumstances, and we recommend consulting a qualified professional before implementing any financial, legal, or tax strategies. Past performance is not indicative of future results, and all investments carry risks, including potential loss of principal.