Clark Howard Warns High Earners Against This Popular Roth IRA Move

Clark Howard has long favored Roth retirement accounts, but a recent podcast answer raised a narrower question for high earners: Once a household is already maximizing its workplace retirement options, is a separate backdoor Roth IRA worth the additional work? On the April 22 episode of his podcast, Howard told a North Carolina listener, “Overwhelmingly, I’d say probably 95% of wage earners would be better off going all in on Roth 401(k) instead of traditional 401(k).” That comment compared Roth and traditional 401(k) contributions; it was not a blanket recommendation to avoid backdoor Roth IRAs. In fact, Howard’s own website describes the backdoor Roth as a potentially valuable strategy for high earners.

The decision becomes more complicated for a 48-year-old married couple with modified adjusted gross income near $380,000. That puts them above the 2026 Roth IRA phaseout range of $242,000 to $252,000 for joint filers, eliminating direct contributions. Each spouse could instead make a $7,500 nondeductible IRA contribution and convert it, moving a combined $15,000 into Roth accounts. Done correctly, the strategy adds valuable tax-free retirement growth. Done carelessly—particularly when pre-tax IRA balances trigger the pro-rata rule—it can produce an unexpected tax bill. The real question is not whether the backdoor Roth works, but whether that additional savings space justifies the complexity after the couple has exhausted its workplace Roth options.

The verdict and the math

Howard’s warning is reasonable for this particular household, but it should not be interpreted as a universal reason to skip a backdoor Roth IRA. In 2026, each spouse can make a $7,500 nondeductible IRA contribution and convert it to a Roth. If those annual contributions earn an average 7% return for 20 years, they would grow to approximately $307,000 per spouse, or nearly $615,000 combined. That projection assumes end-of-year contributions, consistent returns, no investment fees and withdrawals that meet the rules for tax-free Roth treatment. Returns are never guaranteed.

The benefit is meaningful, but it may be relatively small compared with what a couple earning $380,000 can save through workplace accounts. Each employee can defer as much as $24,500 into a 401(k) in 2026. The overall defined-contribution limit is $72,000 per participant, although that ceiling includes employee deferrals, employer contributions and after-tax deposits. When the couple turns 50, each spouse’s IRA limit would rise to $8,600, including the $1,100 catch-up contribution. The backdoor Roth still creates valuable tax-advantaged space, but for aggressive savers it is a supplement—not the centerpiece of the retirement plan. The IRS confirms the applicable 2026 limits.

The pro-rata rule trap that can wreck the strategy

The backdoor Roth is simplest when the person making the conversion has no pre-tax money in a traditional, SEP or SIMPLE IRA on December 31 of that year. The IRS applies its pro-rata calculation separately to each spouse, combining that individual’s applicable IRA balances. A spouse’s workplace 401(k) and the other spouse’s IRAs are not included in the calculation.

Suppose one spouse makes a $7,500 nondeductible contribution but already has $92,500 in a rollover IRA. Only 7.5% of the combined $100,000 balance represents after-tax basis. If that spouse converts $7,500, approximately $563 would be tax-free and $6,938 would be taxable. At a 24% marginal federal rate, the resulting federal tax would be about $1,665, plus any state tax—not the $1,800 to $2,000 federal estimate in the original draft. The actual rate depends on taxable income, deductions and filing circumstances.

One possible solution is moving eligible pre-tax IRA money into a current employer’s 401(k), provided the plan accepts incoming rollovers. That transfer generally must be completed before year-end to remove the balance from the pro-rata calculation. The investor should then report the nondeductible contribution and conversion on Form 8606. Failing to file the form does not automatically mean the IRS taxes the money twice, but it can make the investor’s basis harder to prove and may create penalties or reporting problems. The IRS explains the purpose of Form 8606 here.

What to do this week

Start by contributing enough to each 401(k) to capture the full employer match. That money should generally come before an IRA strategy because it provides an immediate return. Next, decide whether traditional or Roth 401(k) contributions make more sense based on current taxes, expected retirement income and available plan choices, then work toward the $24,500 employee limit.

If the plan permits after-tax contributions and either in-plan Roth conversions or in-service distributions, calculate the household’s actual mega-backdoor Roth capacity. The available amount is not automatically $72,000 per person. Employee deferrals, employer matching deposits and other annual additions all reduce the remaining room under that limit. Fees and investment choices should also be considered before assuming the workplace plan is automatically superior.

Before attempting an IRA conversion, list every traditional, SEP and SIMPLE IRA owned by each spouse and verify the projected December 31 balances. Ask the 401(k) administrator whether the plan accepts incoming IRA rollovers, but do not move or convert money until the tax consequences are clear. File Form 8606 for every year involving a nondeductible IRA contribution or applicable conversion. The couple in this example is only 48, so the Roth catch-up requirement does not affect them yet. Once eligible for catch-up contributions, certain higher-wage workers must make those contributions on a Roth basis under the SECURE 2.0 rules. The IRS says that requirement generally begins in 2026.

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