Backdoor Roth IRA.
A definition, in plain English — with the books that teach it.
What it means
A workaround for high earners who exceed the Roth IRA direct-contribution income limits: contribute non-deductible dollars to a traditional IRA, then immediately convert to a Roth. The conversion itself is legal and well-established, but the pro-rata rule means if you already have pre-tax money in any traditional IRA, part of the conversion gets taxed proportionally. Clean it up by rolling existing traditional IRA balances into a 401(k) first if the plan allows.
Example
Single filer earning $250,000 (above the Roth phase-out) makes a $7,000 non-deductible traditional IRA contribution and converts to Roth a week later — $7,000 lands in the Roth, with no tax owed because the contribution was already after-tax and no other pre-tax IRA balances exist.