On the September 10, 2025 episode of The Jon Sanchez Show (available on Apple Podcasts and Spotify), Jon Sanchez and co-host Jason Gaunt, Reno financial advisors at Sanchez Gaunt Capital Management, broke down one of the most powerful — yet often misunderstood — retirement strategies: the backdoor Roth IRA.
For high-income earners who feel “locked out” of Roth IRAs due to income limits, this strategy can open the door to future tax-free growth and withdrawals. Let’s walk through what you need to know.
Why Roth IRAs Matter
Roth IRAs are beloved for three major reasons:
- Tax-free growth – Investments compound without annual tax drag.
- Tax-free withdrawals – As long as you’re 59 ½ and meet the five-year rule, all gains come out tax-free.
- No required minimum distributions (RMDs) – Unlike traditional IRAs, you’re not forced to draw down at a certain age.
The problem? Income limits.
- Single filers: Over ~$146,000 of modified adjusted gross income? No direct Roth contribution.
- Married couples filing jointly: Over ~$230,000? Same roadblock.
That leaves many successful savers unable to take advantage of Roths — unless they use the backdoor.
The Backdoor Roth in Action
Here’s how Jon and Jason explained it step by step:
- Open a Traditional IRA – Even high earners can always contribute here (deductible or not).
- Fund It – For 2025, you can contribute $7,000 if under 50, or $8,000 if 50+. Your spouse can do the same.
- Convert to Roth – Move those funds into a Roth IRA soon after funding. This is the “backdoor” move.
👉 Important tip: Keep this money in a fresh, separate “conduit” IRA. Don’t mix with existing pre-tax IRA dollars, or the tax math gets messy.
Taxes & Pitfalls to Watch
- The conversion is taxable. If you deducted your traditional IRA contribution, you’ll owe ordinary income tax when converting.
- If it’s after-tax money, keep it clean. Fund the traditional IRA with after-tax dollars, then convert quickly before the account grows. That way, there’s little or no tax bill on conversion.
- Pro rata rule warning. If you already have a big traditional IRA, the IRS looks at all IRA money when figuring the taxable portion of your conversion. That’s why Jon and Jason stress keeping a dedicated conduit account.
- Always check with a tax professional. You don’t want your “backdoor” to accidentally become a tax trap.
The Peter Thiel Example
Jon shared the legendary case of PayPal co-founder Peter Thiel. In 1999, Thiel used a Roth IRA (via strategies like the backdoor) to buy early PayPal shares worth just a few thousand dollars. By 2021, that Roth had grown to an estimated $5 billion — 100% tax-free.
While most of us won’t hit billions, the principle stands: tax-free compounding is powerful.
Why the Government Doesn’t Love It
Backdoor Roths have been debated in Washington for years. The Biden administration even floated closing the loophole a few years back, but it survived. Lawmakers know Roths deny the IRS future tax dollars — making the strategy especially valuable while it’s still available.
Bottom Line
If your income keeps you from contributing directly to a Roth IRA, the backdoor Roth is one of the smartest retirement moves you can make. Done correctly, it allows you to:
- Build a tax-free retirement bucket
- Avoid RMDs
- Hedge against future higher tax rates
As Jon put it: “It’s one of the most powerful strategies for retirement savings — and very few people even know it exists.”
Just make sure to run it by your tax advisor before you act.
Have questions? Reach out to Sanchez Gaunt Capital Management at office@sanchezgaunt.com. Our team would be happy to help you or make an appointment at our office at 9160 Double Diamond Parkway Suite 100, Reno, NV 89521.
✅ Pro tip: Max out your 401(k) (especially if it offers a Roth option), then look at the backdoor Roth as your next step in tax-advantaged retirement planning.