Roth accounts are great; however, by the time you realize that, your income may be too high to contribute.
Depending on your situation, you might have a backdoor.
Standard Backdoor – Uses IRA
Contribute (preferably) up to the contribution limit in after-tax money into your IRA, and then transfer that into your Roth account. This works because IRAs don’t have an income limitation. If you already have pre-tax money in your IRA reach out to your tax advisor before doing this strategy because you might end up with a tax bill.
Mega Backdoor – Uses 401(k)
Same as above, except you make the after-tax contributions to a 401(k) plan. This is considered a “Mega Backdoor” because the contribution limits for a 401(k) are much higher than an IRA. The limiting factor is if your company offers after-tax contributions to their 401(k) or not. There is much more flexibility for business owners who create their own 401(k) plans.
Look into which strategy best fits your situation to ensure you make maximum contributions to your retirement accounts. Feel free to reach out to us if you have questions!