Maximizing Retirement Savings for High Earners: Beyond the Basics

As a CFP, I often get asked by my high-earning clients, "I've maxed out my 401(k) and IRA. Now what?" Well, buckle up, because we're about to dive into some advanced strategies that can turbocharge your retirement savings.

401(k): More Than Meets the Eye

Let's start with the familiar territory of your 401(k):

1. Employee Contributions: In 2025, you can contribute up to $23,500 if you're under 50, or $31,000 if you're 50+.

2. Employer Contributions: Your company can chip in too, but remember, the total (your contribution + employer's) can't exceed $70,000.

Pro tip: If you're between 60-63, you might be eligible for an even higher catch-up contribution. Check with your plan administrator!

The Backdoor Roth IRA: A Secret Passage to Tax-Free Growth

If your income is too high for a regular Roth IRA, don't worry! Here's a workaround:

1. Contribute to a Traditional IRA (non-deductible)

2. Convert it to a Roth IRA

It's like sneaking your money into the tax-free growth party through the back door.

The Mega Backdoor Roth: For Serious Savers Only

This strategy is like the backdoor Roth's big brother. Here's how it works:

1. Make after-tax contributions to your 401(k)

2. Roll these contributions into a Roth IRA

You could potentially stash away an extra $31,000 this way. It's like finding an extra gear in your savings engine!

Why These Strategies Matter

Imagine retiring with a hefty chunk of your nest egg in Roth accounts. That means:

• Tax-free withdrawals in retirement

• No Required Minimum Distributions (RMDs)

• More flexibility in managing your tax situation in retirement

A Word of Caution

While these strategies are powerful, they're not one-size-fits-all. It's crucial to consider:

• Your current tax bracket vs. expected retirement tax bracket

• Overall financial goals and timeline

• Cash flow needs

Remember, I'm here to help you navigate these complex waters. Every financial situation is unique, so let's chat about how these strategies might fit into your personal financial puzzle.

Ready to take your retirement savings to the next level? Give me a call or shoot me a text. (530) 232-4822 Let's make your money work as hard as you do!