You Make Too Much for a Roth. Use the Side Doors.

For many executives and owners, the income limit only closes the front door. Here are the three side doors, and what to do about each before December 31.

You looked into a Roth IRA once. Maybe ten years ago.

The answer was short: you make too much. Door closed. You moved on, kept maxing the regular 401(k), and filed "Roth" under things for people earning less than you.

Here's the problem. That answer was only about the front door.

For many high earners, there are three side doors into tax-free money. They're in the tax code on purpose. They're not loopholes, and they're not new. They just take paperwork and a calendar, which is exactly why most executives walk past them.

And two of the three have a hard deadline: December 31.

Why bother? Because of how the money comes out

Pre-tax money (your traditional 401(k), rollover IRA, deferred comp) gets taxed when it comes out. At whatever rates exist then. On top of whatever else you have going on that year.

Roth money comes out tax-free, if you follow the rules. Roth IRAs have no required minimum distributions during your lifetime, and since 2024 neither do Roth accounts inside a 401(k). Heirs generally inherit Roth money income-tax-free too.

Most executives I talk to have the same shape: a huge pre-tax pile, a taxable brokerage account, and almost nothing in Roth. That's not a plan. That's a default.

One tax bucket means one lever. Three buckets means you get to choose which one to pull from, every year, for the rest of your life.

Tax diversification isn't sexy. It's control.

Side door #1: The backdoor Roth IRA

How it works: Anyone with earned income can make a nondeductible contribution to a traditional IRA, no income limit. Then you convert it to a Roth. Since you already paid tax on the money going in, there's little or nothing to tax on the way through.

For 2026, the IRA contribution limit is $7,500 (plus a $1,100 catch-up if you're 50 or older). Per person. Married couples can each do one.

That's not life-changing in one year. Over 15 years, for two spouses, it's real money growing tax-free.

The trap: the pro-rata rule. This is where most DIY backdoors go sideways.

When you convert, the IRS doesn't let you pick which dollars you converted. It looks at all your traditional, SEP, and SIMPLE IRA balances on December 31 and treats the conversion as a proportional mix of taxed and untaxed money.

Quick example. You put $7,500 into a new IRA and convert it. But you also have a $292,500 rollover IRA from an old job. Your total is $300,000, and only 2.5% of it has been taxed. So roughly 97.5% of your "tax-free" conversion is taxable. Not what you signed up for.

The common fix: If your current 401(k) accepts roll-ins, many people move the old pre-tax IRA money into the 401(k) before December 31. Workplace plans don't count in the pro-rata math. Then the backdoor runs clean.

Do this:

1. List every IRA you and your spouse own, including old SEP and rollover IRAs.

2. If any have pre-tax money, ask your plan administrator whether your 401(k) accepts roll-ins, and get the transfer moving now. Transfers can take weeks.

3. Make the nondeductible contribution, convert, and file Form 8606. Every year. Your CPA needs to know it happened.

4. Note the deadlines: the 2026 contribution can be made until the April 2027 filing deadline. But the December 31 IRA balance drives the pro-rata math, so the cleanup has a 2026 deadline.

Side door #2: The mega backdoor Roth (the big one)

This is the door most executives have never heard of, and it's usually the biggest.

How it works: The $24,500 you can defer into your 401(k) in 2026 is just your elective limit. The total limit for everything going into the plan (your deferrals, your employer's match, and after-tax contributions) is $72,000 for 2026, before any catch-up.

If your plan allows after-tax contributions (not the same as Roth contributions) and lets you convert them to Roth, either inside the plan or by moving them out while you're still working, you can fill that gap with money that ends up in a Roth.

Here's the math for one example executive:

• Total plan limit: $72,000

• Your pre-tax or Roth deferrals: $24,500

• Employer match: $10,000

• Room for after-tax contributions: $37,500

That's $37,500 a year into Roth, in one account, from one person. Five times the backdoor IRA.

The catches:

• Not every plan allows it. You need both features: after-tax contributions and a way to convert them.

• Convert quickly. After-tax money that sits for months picks up earnings, and those earnings are taxable when converted.

• Highly paid employees sometimes get limited or refunded because of the plan's nondiscrimination testing. Ask HR if that's happened before.

• It's cash-flow money. $37,500 out of your paycheck is $37,500 not in checking. Plan for it, especially around tax payments.

Do this:

1. Open your 401(k) summary plan description and search for "after-tax" and "in-plan Roth conversion" (or "in-service withdrawal").

2. If it's there, check whether the plan offers automatic conversion. Many recordkeepers do, and it solves the earnings problem.

3. Set the after-tax percentage for 2027 now. Open enrollment season is the natural time, and payroll changes take a cycle or two.

4. If it's not in your plan, ask HR whether it's on the roadmap. Plans add it when people ask.

If you own the business: You are the plan sponsor. Many owners can design their plan to allow after-tax contributions and in-plan conversions. It's a conversation with your plan provider and your third-party administrator, not a wish.

Side door #3: Conversions in your low-income years

This one isn't about new money. It's about moving existing pre-tax money into Roth on purpose, in a year when your tax rate is unusually low.

You pay income tax on whatever you convert, that year. So the whole game is timing.

For many executives and owners, the lowest-tax years aren't the working years. They're the gaps:

• The year after you retire, before deferred comp payouts, Social Security, and required distributions stack up.

• A year between roles, a sabbatical, or a year with a smaller bonus.

• For owners, a year with big depreciation, a business loss, or the quiet years after a sale (the sale year itself is usually the worst year to convert).

• A move from a high-tax state to a no-income-tax state like Florida, for state tax purposes.

Decision rules to run with your CPA:

1. Fill the bracket, don't blow through it. Pick a ceiling, the top of a bracket you're comfortable paying, and convert only up to it.

2. Pay the tax from outside cash. Using IRA money to pay the conversion tax shrinks the benefit, and can add a penalty if you're under 59½.

3. Watch the side effects. A bigger income year can raise Medicare premiums two years later (IRMAA), change health insurance subsidies, and affect other income-based calculations.

4. Think about the survivor. When one spouse dies, the other often files single, with narrower brackets, on the same pre-tax pile. Converting earlier can soften that.

5. There's no undo. Since 2018 you can't reverse a conversion. Convert what you're sure about, and don't do it in a panic the week of Christmas.

6. Mind the five-year rule if you might need converted money before 59½.

Conversions count in the calendar year they happen. December 31 is the deadline, not April 15.

Your Roth checklist before December 31

Put one working session on the calendar with your CPA or advisor in the next two to three weeks. Bring:

• Every IRA statement for you and your spouse (including old rollovers and SEPs)

• Your 401(k) summary plan description, or a screenshot of the contribution options

• Your 2026 tax projection: salary, bonus, vesting equity, deferred comp, business income

• Your best guess at income for the next five years, including retirement or sale timing

Walk out with three answers:

1. Backdoor: Yes or no for 2026? If yes, is the pro-rata cleanup done before 12/31?

2. Mega backdoor: Does my plan allow it? If yes, what's my after-tax percentage for 2027?

3. Conversion: Is this a low-rate year? If yes, how much, up to what ceiling, and who pays the tax from which account?

If all three answers are "no," that's fine. Now it's a decision instead of a default.

Rules over feelings.

Where to go from here

If your comp has a lot of moving parts (salary, bonus, RSUs, deferred comp), the free Executive Comp Optimizer can help you see the whole stack in one place before that working session.

If you own a business and a sale is on the horizon, the years right after a sale can be some of the best conversion years you'll ever have. SellSmart Planner helps you map the before and after.

And if you'd like a second set of eyes on whether the side doors are open for you, start a conversation. Educational conversation, not a product pitch.

Jason C. Hilliard, J.D.

This article is for educational purposes only and is not tax, legal, or investment advice. Contribution limits and rules cited are for 2026 and can change. Roth strategies depend on your plan documents, income, and full tax picture. Please review your specific situation with your CPA and advisors before acting. Forecast Capital Management LLC is a registered investment adviser. Registration does not imply a certain level of skill or training.