Effective Roth IRA Strategies for High Earners in Their 30s and 40s

If you are in your 30s or 40s, and you're already too wealthy to contribute to a Roth IRA, first off, congratulations, you're gonna be just fine. But if you do want to continue to contribute to a Roth IRA over the next 30 or 40 years, here are three techniques that you can use.

1. The Backdoor Roth IRA Conversion

Contribute up to the annual limit to a traditional IRA, no income limits, and then convert to a Roth IRA. Also, no income limits on a Roth conversion.

2. The Mega Backdoor Roth IRA Conversion

Contribute up to the annual total contribution limit to your employer's traditional 401k, again, no income limits, and then convert to a Roth IRA. Remember that total contribution limits are about three times higher than individual contribution limits. That's why this is the mega option that can truly set you up to crush life down the road. To be eligible, your employer's plan must allow after-tax 401k contributions, and it must allow for in-plan Roth conversions.

3. Be Tax Aware

Regardless of which technique you use, make sure you are always 100% aware of how these moves will affect your tax situation, as any conversion from a pre-tax account to a post-tax account will trigger major tax events. Thus, it's best to use these strategies if you believe you will be in a higher tax bracket than you are today, and you can always convert in smaller portions annually so you're not hit with one major tax event.

If any of this is helpful, like and follow, and I'll keep trying to get you one step closer to where you need to be.

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