The point is that there are income limits for this process:
1. Take N dollars of post-tax money.
2. Put it in a Roth IRA.
But the same limits don't apply to this process:
1. Take N dollars of post-tax money.
2. Put it in a traditional IRA.
3. The next day, convert the traditional IRA to a Roth IRA.
When you do the conversion, you only owe taxes on any additional earnings (not your post-tax contribution) during the one day that it was a traditional IRA. So the second procedure accomplishes almost exactly the same thing as the first one, but it legally gets around the limit designed to prevent rich people from getting Roth IRA tax breaks.
1. Take N dollars of post-tax money.
2. Put it in a Roth IRA.
But the same limits don't apply to this process:
1. Take N dollars of post-tax money.
2. Put it in a traditional IRA.
3. The next day, convert the traditional IRA to a Roth IRA.
When you do the conversion, you only owe taxes on any additional earnings (not your post-tax contribution) during the one day that it was a traditional IRA. So the second procedure accomplishes almost exactly the same thing as the first one, but it legally gets around the limit designed to prevent rich people from getting Roth IRA tax breaks.