You may think a high income will shut you out of Roth IRA eligibility, but there’s another way in: a backdoor Roth IRA. And it can save you thousands of dollars in taxes.
Roth IRAs are retirement accounts that allow you to sock away money you’ve already paid taxes on. One of their big selling points is that you get to withdraw that money — and any investment gains — tax-free when you retire. So if you’re in, say, the 15% tax bracket now but expect to be in the 28% tax bracket when you retire, a Roth IRA can save you a ton of money later in life.
Here’s the thing, though: High earners can’t contribute to Roth IRAs. The government allows only those people with adjusted gross incomes below $194,000 (married filing jointly) or $132,000 (single) in the front door. (Find out how much you can contribute to Roth and traditional IRAs.)