3 Roth IRA alternatives for high-income earners

You have a few different choices when it comes to saving for retirement. One of the most popular options is to contribute to a 401(k) savings account through your employer. Other options include saving through a traditional individual retirement account (IRA) or a Roth IRA.

Roth IRAs appeal to many people because you do not pay taxes on the withdrawals made during your retirement. You do have to pay taxes on contributions, but if you are expecting to be in a higher tax bracket in the future, it can be beneficial to have funds you can withdraw from without paying taxes on withdrawals. 

However, there are limits to who qualifies to use a Roth IRA.

Higher-income earners may only be eligible to make reduced contributions or barred from using a Roth IRA completely. If your income is too high to get the most out of a Roth IRA, there are other options to consider.

Roth IRA alternatives for high-income earners

1. Max out your 401(k) — We know the tax-free withdrawals of a Roth IRA make it an attractive option, but if you earn too much for getting the most out of a Roth IRA, you should still try to max out your 401(k) if you have one. As of 2021, you may contribute up to $19,500 annually into your 401(k) plus an additional $6,500 if you are age 50 or older.  If your 401(k) has a Roth option, consider using it, as they is no income limitation when contributing to a Roth 401(k).
   
2. Roll over traditional IRA into a Roth IRA — Have you been contributing to a traditional IRA? You may be able to take some or all of these funds and convert them into a Roth IRA. You will need to pay income tax for the funds converted, but it can be a great way to secure the future tax benefits offered by a Roth IRA.
   
3. Make long-term investments — Capital gains taxes on assets held for longer than one year are significantly reduced compared to short-term capital gains taxes. Consider investing in long-term stocks, exchange-traded funds (ETFs), mutual funds and bonds that can help grow your wealth while keeping your taxes at a minimum.

Talk to a ProVise CFP® professional about Roth IRA alternatives for high-income earners

At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about Roth IRA alternatives for high-income earners? Contact ProVise today to schedule a complimentary consultation.