By Mat Sorensen | Directed IRA

Do you make too much money to contribute to a Roth IRA? If so, the “backdoor” Roth IRA strategy is one of the best loopholes in the tax code you could utilize today. Many high-income earners believe they can’t contribute to a Roth IRA because they make too much money. This is false, and here’s why:

While direct contributions to the Roth IRA (through the “front door”) are not permitted if you make too much, according to the IRS MAGI limits, you can still take advantage of the Backdoor Roth IRA.

What is a Backdoor Roth IRA?

A Backdoor Roth IRA consists of 3 steps facilitated by your IRA’s custodian, such as Directed IRA.

  • It combines opening/funding a Traditional IRA (or other pre-tax retirement account).
  • Then completing a Roth conversion.
  • The result is a Backdoor Roth IRA, and it is treated the same as any other Roth IRA.

What is the income phase-out?

  • For single filers: The phase-out range begins at $153,000 and ends at $161,000.
  • For married couples filing jointly: The phase-out range begins at $228,000 and ends at $240,000.

These phase-out limits determine whether you can make a full contribution, a partial contribution, or no contribution at all to a Roth IRA or Roth 401(k), based on your modified adjusted gross income (MAGI).

What is a Roth conversion?

A Roth conversion is the transfer of retirement funds and/or illiquid assets from a pre-tax retirement account to a Roth IRA. The key is the IRS does not limit who can complete Roth conversions based on income. Many types of pre-tax accounts can be converted to a Roth IRA. This includes but is not limited to the following common account types: Traditional IRAs/Rollover IRAs, SEP IRAs, 401(k)s, Solo 401(k)s, and more! If you do not exceed the MAGI limits set by the IRS, you can contribute directly to the Roth IRA which is not necessary for the backdoor strategy. This is because you can contribute to the Roth IRA through the “front door” directly. Keep this option in mind though, especially if your income increases year over year. You may need to leverage this option in the near future.

Why would someone want a Roth IRA instead of a Traditional IRA/other pre-tax account?

The Roth IRA is the optimal type of retirement account that you can have as part of your retirement strategy. Roth IRAs are funded by post-tax contributions, meaning you cannot deduct them in the year in which you make the contribution. Since the account is funded with taxed dollars, the earnings you accrue on those dollars also grow tax-free for you to withdraw in retirement (or sooner).

The Roth IRA is an account used by the wealthiest people in the United States (i.e., Peter Thiel, Mitt Romney, and many others), but this option isn’t just available for the wealthiest. That is why we want to share this knowledge with as many people as we can. Everyone should be able to enjoy having tax-free income in retirement.

How can I implement the Backdoor Roth IRA strategy?

Regardless of your income level, we can assist you with transitioning your retirement assets to a Roth IRA. It’s as easy as 1-2-3.

Implement the Backdoor Roth IRA with these 3 steps:
1. Open a Traditional IRA and a Roth IRA with Directed IRA.
2. Make your annual contribution to the Traditional IRA.
3. Submit a Roth Conversion request and let us at Directed IRA handle the rest!

That’s it. These three steps allow you to leverage the powerful Roth IRA and all its benefits regardless of how much you make. Does this sound too good to be true? Because it gets even better. With a Self-Directed Roth IRA, you have the power to invest in What You Know. A Self-Directed Roth IRA allows you to invest in alternative assets with your tax-free Roth IRA. We can custody a wide array of assets, including but not limited to these popular asset classes:

  • Real Estate (rentals/fix and flips)
  • Multi-family properties
  • Private Lending/Note Investing
  • Precious Metals
  • LLCs/Private Placements (PPMs)/Syndications

If you don’t understand the stock market, why are you trying to beat it? Invest in a tangible and even physical asset class that helps you build a legacy AND a diverse portfolio.

How do I know if I can even contribute to a pre-tax retirement account?

If you want to contribute to a Traditional IRA, you must have “earned income” in the U.S. You can contribute up to $7,000 annually for 2024, or 100% of your earned income, whichever is less. The deductibility of this contribution varies based on your income level and whether or not you contribute to a 401(k) plan with your employer. Although you may contribute to a pre-tax retirement account, these amounts cannot always be deducted. If you make a non-deductible contribution, track it on your Form 8606. If you are reading this after 2024, the IRS has announced future contribution limits and changes. You can find them here: IRA Contribution Limits.

Pro-rata Rule on Roth Conversions

If you previously made deductible contributions to a Traditional IRA or other pre-tax account, you should be aware of the pro-rata rule for Roth conversions.

It ensures IRA owners are converting deductible contributions first, then converting the non-deductible contributions thereafter. Deductible contributions that are converted are subject to taxes. Non-deductible contributions are not.

Top 3 Questions we get regarding the Backdoor Roth IRA strategy:

  1. Is there a dollar limit to a Roth conversion? No. You can convert as much as you’d like within any tax year, regardless of your income. Be aware that you may be triggering a taxable event, but this is intentional and part of the strategy. This allows you to pay taxes now to avoid taxes later.
  2. Can I still do a Roth conversion if I contribute to a 401(k)? Yes.
  3. Do I have to convert my entire account at once? No. You can convert a small amount each year and even forego it for any year. This method is commonly known as “chunking.” Chunking is a strategy if you have a large balance you are trying to convert to a Roth IRA. It allows you to spread out the potential taxes due throughout a few years. Non-deductible IRA contributions are a typical place to start with your Roth conversions. When you report a non-deductible contribution to an IRA on your 1040, you already don’t benefit from the advantages of a deduction, so why not formally make these funds post-tax in a Roth IRA?

Tax Forms

Here are a few tax forms to be familiar with when you are planning to do a Roth conversion or when implementing the Backdoor Roth IRA strategy.

Form 1099-R: This form reports funds or assets distributed from your pre-tax retirement account. Your custodian files this on your behalf.

5498: This form reports funds or assets received in your Roth IRA. Your custodian also files this on your behalf.

Form 8606: This is where you report your non-deductible contributions made to pre-tax retirement accounts. You are responsible for filing this form.

Form 1040: This is where you report your IRA distributions and the taxable amount (the taxable amount is the distribution amount on your 1099-R minus the total non-deductible contributions from your 8606. This amount could range from $0 up to the amount on your 1099-R). You are responsible for filing this form. Converting non-deductible contributions does not cause a taxable event. Converting earnings within your pre-tax account will cause a taxable event.

Spousal IRAs: Spousal IRAs also qualify for this strategy. Even if your spouse has no earned income, if you are married and filing jointly then your spouse can also contribute to a pre-tax retirement account and convert it to a Roth IRA!

How do I get my Backdoor Roth IRA started?

Contact the team at Directed IRA for a complimentary, getting-started call today to see if a Self-Directed Roth IRA is an option for you. We walk you through each step, assist in identifying what accounts you can utilize immediately, and begin your self-directed Roth IRA journey with you in 15 minutes or less.

Our committed team can be contacted at 602.899.9396, and we are ready to assist you in achieving a financially stable future.

If you need a new Roth IRA, be sure to enter this discount code AZREIA150 to get $150 off your first year’s annual fee!

Mat Sorensen

Mat has been at the forefront of the self-directed IRA industry since 2006. He is the CEO of Directed IRA & Directed Trust Company which handles all types of self-directed retirement accounts, which are typically invested in real estate, private company/private equity, IRA/LLCs, notes, precious metals, and cryptocurrency. Mat is also a partner at KKOS Lawyers. He is published regularly on retirement, tax, and business topics, and is a VIP Contributor at Mat is the best-selling author of The Self-Directed IRA Handbook, the most widely used book in the self-directed IRA industry.

Kevin's Story

“The Launch Pad was exactly what I was hoping for. The deep dive into my expectations through your assessments was very valuable. The plan you provided me for my investment future put me at ease and gave me some reassurances that I am heading in the right direction. Launch Pad is definitely something I would recommend to all new investors. Thank you!”

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Matt & Nicole's Story

“My wife Nicole and I wanted to thank you for the 4 hours of dedicated time you set aside for us. The Launch Pad program really helped us find out what our interests were, and you experience and guidance helped us figure out how to go about achieving our goals! We always thought the recommendation you gave us was unachievable, but after our meeting we realize that it is!

The Launch Pad program was extremely insightful, and we thank you for your input and explanations! Also, we look forward to all the subgroups you recommended we attend.

Thanks again! I highly recommend the Launch Pad to any new investor!!! Thanks to this program, we shaved probably 3 years off the learning curve and countless hours of frustration.”


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Kevin's Story

“I took AZREIA’s Launch Pad program with Alan Langston. I found it to be very helpful as a “newbie” to REI.

The program, over 4-hours long, walked me through what my initial strategy and tactics should be for me to reach my goals. It even told me if I should even be an REI to begin with. Yes, it was that detailed.

Best of all Alan showed me how only a single SFH rented out at $2k/mth could get me to my retirement goals in 10 years!”


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Who We Are!

AZREIA, Arizona Real Estate Investors Association, is a professional association that exists to serve the needs of independent real estate investors. We provide market information and analysis, education, networking opportunities, implementation guidance, and support to assist our members in achieving success in real estate investing. Since our founding in 2002, we have helped thousands of real estate investors.

  • We believe real estate investing can help anyone achieve their financial goals. Success is a process and real estate investing over the long-term can provide exceptional results. Your results are dependent on your commitment to success and the effort you put forth in addition to market factors both seen and unseen. Not everyone is willing to commit and do what is necessary (legally, ethically and morally) to succeed. We do not believe in “get rich quick”! Please take our FREE Entrepreneurial Self Assessment to better understand your suitability for real estate investing. It takes about 20 minutes.
  • We believe planning is an essential element to reaching your desired outcome. We feel our Launch Pad program for new investors is an exceptional planning process for new real estate investors that will keep you focused, take months off your development cycle and give you a much better opportunity for success. Launch Pad is available to everyone. It is available for AZREIA members at the small price of $30. Non-members may attend on a space available basis but pay a non-refundable $100 fee to attend.
  • We believe strongly in education and offer reasonably priced education both internally and from respected educators outside of AZREIA. We are not mentors or coaches. We do not offer these type of high cost programs.
  • We believe networking is critical to any investor’s success. Networking with a purpose will help you build or improve your team, understand how others are successful, learn different investing techniques, acquire property, find money partner and much more. We believe networking is the second most important aspect to successful investing falling only behind implementing a well thought out plan. In support of this belief, AZREIA offers several networking opportunities every month.
  • We believe an association should bring purchasing power to its members. AZREIA has exceptional benefits that save our members money, increase their profits and simplify their business.
  • We believe and enforce our strong Code of Ethics. (CLICK TO VIEW)

AZREIA is believed to be the largest REIA in the country. We have been the most highly recognized REIA by the National Real Estate Investors Association. No other REIA has earned the REIA of the Year Award as many times as AZREIA. Additionally, National REIA has recognized AZREIA’s education program, community program and Government Affairs program as the best. National REIA has also honored AZREIA as being the Most Innovative. Locally, the Phoenix and Tucson Business Journals have listed AZREIA among the Top 10 Professional Associations.


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Will real estate investing solve my problem?

Most people consider investing in real estate as a way to solve an issue or issues in their life. The good news is real estate investing can work for anyone. So, the quick answer to the question is yes, real estate investing is a good way to solve many financial issues.

The bad news is many times a person will not take the necessary steps to ensure success in real estate investing. So, while real estate investing will work for anyone, it will not work for everyone. If you are committed and take the necessary actions (legally, ethically and morally) your probability of success is very high.

We encourage all new investors to complete AZREIA’s FREE Entrepreneurial Self Assessment. This 20 minute exercise will help you determine if real estate investing is right for you. Also, you will understand the type of investing most suited to your personal situation. [CLICK HERE to take the Entrepreneurial Self Assessment] Based on your results, you may determine to complete Launch Pad.

At AZREIA, we have a path for all people considering real estate investing to follow as a way to get started and determine if real estate investing will work for you. We call it Launch Pad!

Launch Pad is a planning process that when completed provides most new investors with the following:

  1. Your Optimal Investing Path
  2. Your Preferred Property Type
  3. Your Property Acquisition Plan
  4. Your Funding Plan
  5. Your Educational Plan
  6. Your Team Building Plan
  7. Your Networking Plan
  8. Your Beginning Timeline

We’re sure you noticed that each one of the above eight items begins with “Your”. That is because every investor is different. Your needs are unique to you, so your plan needs to be specifically designed to meet those needs. Also, your plan should fit in with your current life situation.

Here’s the kicker…. Going through the Launch Pad process will also determine if real estate investing will work for you at this time in your life. If so, great! You have a plan to implement. If not, isn’t it better to know that up front and save you a lot of time, money and anguish? At that point, you can consider other ways to solve the problems you are facing.

Consider registering for our next Launch Pad session. You will need to set aside about four hours to complete the process. If you are an AZREIA member, there is a small $30 fee for Launch Pad. Non-members may attend on a space-available basis but pay a non-refundable $100 fee to attend.

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New to Real Estate Investing: How AZREIA Membership Helps Me

Congratulations! Just knowing that real estate investing will help you means you’re off to a great start to achieving your financial goals. As an AZREIA member and new to real estate investing we take all of the guesswork out. You start by completing Launch Pad and then the rest of the items listed below. There is a Launch Pad session about every 30 – 45 days. This process will take months off your development time and gets you started doing deals as soon as possible.

1. Register for and complete Launch Pad – Proper planning is the major differentiator between those who succeed and those who don’t. We are so committed to you getting off to a great start that Launch Pad is included for AZREIA members for just $30. This four-hour session provides most new investors the following eight critical items:

  1. Your Optimal Investing Path
  2. Your Preferred Property Type
  3. Your Property Acquisition Plan
  4. Your Funding Plan
  5. Your Educational Plan
  6. Your Team Building Plan
  7. Your Networking Plan
  8. Your Beginning Timeline

We’re sure you noticed that each one of the above eight items begins with “Your”. That is because every investor is different. Your needs are unique to you, so your plan needs to be specifically designed to meet those needs. Also, your plan should fit in with your current life situation.

Register for the next available Launch Pad session: VIEW CALENDAR

2. Start implementing your Launch Pad Plan immediately! Your personal Launch Pad plan tells you what to do and when to do it. So, schedule the education you need. Begin building your team. Attend the networking sessions important to your plan. Implement your Acquisition Plan. Time to get going! It’s all in your Launch Pad plan!

3. Review the latest Market Update in the Member Resources tab in the Member’s Area of this website. As an investor it is important that you stay informed on the market. Creative real estate investing means being able to respond to market conditions in your negotiations, marketing, acquisitions, pricing, etc. It will take you a while to become comfortable with market trends. Attending the Market Update and Market News segments of AZREIA’s monthly meetings will help you understand trends and directions important to your investing.

4. Optional: View the Success Factors video series by CLICKING HERE. This free, one-hour, six-part video covers several important topics for new investors:

  1. What Will Be Covered
    1. Goal Setting
    2. Getting You Started Quickly
    3. Taking Months Off Your Ramp Up Time
    4. Getting You Connected
    5. Reducing Mistakes
  2. Jumping Right In!
    1. Getting in the Right Mindset to Succeed
    2. Top 5 Success Factors
    3. Separating Fact from Myth
    4. Understanding Different Investing Strategies
  3. Education: Spending Your Dollars Wisely
    1. Education You Need Versus Unnecessary Education
    2. Mentors: What You Need to Understand Before Spending Your Money
  4. It’s All for Nothing if You Don’t Do a Deal
    1. Finding Deals
    2. Getting Money for Deals
  5. Tools for Success
    1. Building Your Team
    2. Leveraging the Market Update
  6. Time to Get Started!
    1. Look Out!
    2. Your Next Steps

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Experienced Investors

Congratulations! You are somewhere along the path to achieving your objectives. Maybe you have rehabbed a couple of houses or acquired a few rentals. Possibly you have already achieved your objectives and are fully living the life you dreamed. Regardless of where you are on your path, an AZREIA membership will benefit you by helping you get to your goals faster, increasing the margins on your current investments and simplifying your business.

Seven Ways AZREIA Will Help You

1. Market Information – Market knowledge sets you apart from your competition. How you use the knowledge and information will be unique to you and your needs. Valued market information will help you adjust your investing to current market conditions, so you don’t miss opportunities. The knowledge you gain from this valuable tool will help you communicate as an expert. It will help you raise money from investors. You will justify pricing and offers based on market trend analysis. The Market Update is invaluable and free to members.

2. Controlling Your Cost & Saving Money – AZREIA members have access to exclusive benefits from dozens of our Business Associates and major national companies like The Home Depot where members can qualify for 2% rebate and receive exclusive pricing on paint, cabinets and appliances. AZREIA members on average save over $1000 per year each through our expansive relationships. Experienced members save many thousands of dollars each year.

3. Simplify Your Business – Real Estate investing is constantly changing. New processes, new technology, new creative techniques are always coming along. AZREIA will keep you at the forefront of it all.

4. Networking – The most successful investors realize the tremendous value of networking. AZREIA makes it simple to network with a purpose. From the structured networking of the Phoenix Real Estate Club designed for experienced investors to achieve results to great networking opportunities at all our strategy based subgroups, we have made networking effortless.

5. Improving Your Team – We know you already have a team in place. You wouldn’t be a successful investor without one. Through AZREIA’s Business Associate Program it is very possible you will improve your team with experts in virtually all of the services and products you will need. You know the value of having an experience, expert team. If you need to upgrade your team, AZREIA can help.

6. Education – You’re successful, so you are smart as it relates to investing. AZREIA’s most successful investors continuously invest in their advanced education. AZREIA’s reputation allows us the benefit to be very picky on the national educators we bring to our members. We realize it is important for you to understand the latest techniques and how to integrate them into your current investing.

7. Two Things Successful Experienced Investors Need To Do – We have found that time constraints often prevent or delay experienced investors from doing two thing that will protect their long term success – proper insurance coverage and exceptional asset protection. AZREIA will assist you in understanding your insurance coverage and asset protection. We are not an insurance company or attorneys and will not give you advice. We will help you to understand what you need to know and the questions you must have answers to in both of these critical areas. There is no reason to work a lifetime for success and give it away in a day. Don’t be “one of those investors” with a story. Preventing the loss of success is possible and something every investor should do.

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Help for Non-Members

Naturally we can help you more if you are an AZREIA member, but there are several things you can do as a non-member.

1. Take our FREE Entrepreneurial Self Assessment. This first step of our Launch Pad program helps you better understand your suitability for Real Estate Investing. It takes about 20 minutes to complete. [CLICK HERE to take the Entrepreneurial Self Assessment]

2. View the Success Factors videos. This free one-hour, six-part video series (CLICK HERE to view) covers several important topics for new investors:

    • What Will Be Covered – Goal Setting, Getting You Started Quickly, Taking Months Off Your Ramp Up Time, Getting You Connected, Reducing Mistakes
    • Jumping Right In! – Getting in the Right Mindset to Succeed; Top 5 Success Factors; Separating Fact from Myth; Understanding Different Investing Strategies
    • Education: Spending Your Dollars Wisely – Education You Need Versus Unnecessary Education; Mentors: What You Need to Understand Before Spending Your Money
    • It’s All for Nothing if You Don’t Do a Deal – Finding Deals & Getting Money for Deals
    • Tools for Success – Building Your Team & Leveraging the Market Update
    • Time to Get Started! – Look Out!; Your Next Steps

3. Take a Launch Pad session. This is free for members, but it is available to non-members for a fee on a space available basis. Launch Pad is a planning process when completed provides most new investors with the following:

    • Your Optimal Investing Path
    • Your Preferred Property Type
    • Your Property Acquisition Plan
    • Your Funding Plan
    • Your Educational Plan
    • Your Team Building Plan
    • Your Networking Plan
    • Your Beginning Timeline

I’m sure you noticed that each one of the above eight items begins with “Your”. That is because every investor is different. Your needs are unique to you, so your plan needs to be specifically designed to meet those needs. Also, your plan should fit in with your current life situation.

Register for the next available Launch Pad session: VIEW CALENDAR

4. Attend AZREIA meetings as a guest. There is a reasonable guest fee which is discounted if you register online.

    • The Market Update is presented at our Monthly Meetings, so you are able to receive this valuable information. (Only members may download and use the charts and data.)
    • You may meet AZREIA Business Associates in the Tradeshow during our Monthly Meetings. This will give you access to exceptional product and service providers that successful real estate investors use.
    • Networking at our Monthly Meetings is unsurpassed. As a non-member you may take full advantage of this opportunity.

5. Please enjoy our Blog of interesting articles by industry experts. Access our blog by CLICKING HERE.

6. The best way we can help you is to convince you to become a member. Our benefits are extensive. Our average registered member receives several hundred dollars in rebates and exclusive AZREIA discounts from The Home Depot. Discounts on education and services/products from our Business associates ensure you save big. Every AZREIA member should receive many times their annual dues back just through our rebates and discounts.

Please consider our “Build-Your-Own” membership plan as a cost-efficient way to fully participate in AZREIA. At only $60 a year under our current promotion and low meeting costs it is an ideal way to get started.

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