You can have too much money in pre-tax retirement accounts. It sounds backwards — save more, save more, max it out — but according to senior advisor Aaron Simpson, blindly piling everything into a 401(k) or traditional IRA without a plan for the other side of retirement can quietly set up a tax problem years down the road.

On the latest episode of Dime After Dime, host Tony Stich sits down with Simpson to unpack one of the more misunderstood tools in retirement planning: the backdoor Roth IRA. The name alone raises questions — why does a completely legal strategy sound like something you’d need to sneak through?

Why It’s Called “Backdoor” in the First Place

High earners are shut out of contributing directly to a Roth IRA once their income crosses certain thresholds. The workaround the IRS allows — contribute to a traditional IRA, then convert it — is exactly why the strategy earned its name. Simple in concept. Easy to get wrong in practice, according to Simpson, which is a theme that runs through the entire conversation.

The Problem That Doesn’t Show Up Until Retirement

At 52, tax-free growth can feel like a 25-year-old’s problem. Simpson makes the case for why that’s the wrong way to think about it — the real pressure point isn’t today’s tax bracket, it’s what happens decades later when required minimum distributions force money out of pre-tax accounts on the government’s schedule, not yours. He walks through why a large, all-pre-tax balance can end up pushing retirees back into higher tax brackets right when they expected to be paying less.

The Cost Almost No One Budgets For

Simpson raises a second, less-discussed consequence of a retirement income that leans too heavily on pre-tax withdrawals — one tied to Medicare premiums, not the IRS. It’s the kind of surcharge most people don’t think about until it shows up on a bill, and by then the accounts that triggered it are already built.

The Rule That Trips Up Do-It-Yourselfers

There’s one IRS rule in particular that Simpson says catches self-directed investors off guard more than anything else in the backdoor Roth process — and it has nothing to do with income limits. Get the order of operations wrong, or forget about an old IRA sitting untouched from a job you left over a decade ago, and a conversion that was supposed to be tax-free can end up partially taxed anyway.

Mega Backdoor Roth: A Bigger Version of the Same Idea

For those who’ve already maxed out the standard routes, Simpson also breaks down the “mega” version of this strategy — run through certain 401(k) plans rather than an IRA — along with why it matters most for people who are still years away from retirement, not people already in it.

Who Should Be Paying Attention Right Now

Simpson’s answer to who should prioritize this isn’t just “high earners.” It comes down to the size of a specific number on a retirement account statement — one that, in his experience, he can’t recall a client ever complaining about having too much of, tax-free.