How to Get A Roth IRA for High-Income Earners

If you’re a high-income earner, the IRS may try to prevent you from using a cornerstone retirement vehicle: the Roth IRA. 

Luckily, there are at least four alternative strategies for high-income earners to reap the benefits of a Roth IRA. 

This article will break down the most common options; however, it’s usually best to speak with a qualified financial advisor who can provide personalized advice.

Alternatives to A Roth IRA for High-Earners 

The best course of action for you will depend on your financial goals, investment timeline, income, and assets. 

That said, here are a few strategies that many high earners use to open a Roth IRA.

Roth 401(k)

What it is: A Roth 401(k) is a type of employer-sponsored retirement account that combines features of a traditional 401(k) and a Roth IRA. 

Just like a Roth IRA, you can contribute after-tax dollars and let your account grow tax-free. This means that you won’t owe any taxes when you start making withdrawals in retirement (as long as you meet certain criteria).

How it works: When you sign up for a Roth 401(k) through your job, money is taken out of your paycheck after taxes and deposited into the account. 

That money is then invested—usually in a mix of mutual funds, stocks, or bonds—and it grows over time. 

Some employers may offer to “match” your contributions, making saving even easier. 

As long as you wait until you’re at least 59½ and have held the account for five years, you can withdraw your money (including all the investment gains) without paying any additional taxes.

When it’s a good idea: A Roth 401(k) is a great option if you’re still fairly early in your career and want to enjoy decades of tax-free growth to help fund your retirement. These plans are very similar to Roth IRAs. 

However, the downside is that you can only sign up for this type of plan if your employer offers it.

Roth Conversion

What it is: A Roth conversion is the process of moving money from a traditional retirement account—like a 401(k) or Simplified Employee Pension (SEP)—into a Roth IRA. 

You’ll have to pay taxes on the amount that you convert. 

But once your money is in the Roth IRA, it will grow tax-free and can be withdrawn tax-free in retirement (as long as you meet certain criteria).

How it works: When you convert funds from a traditional IRA or 401(k) into a Roth IRA, the amount you move is added to your taxable income for that year. 

You’ll owe income tax on the conversion, but from that point forward, your money grows tax-free and can be withdrawn without taxes in retirement. 

You can also choose to convert just part of a retirement account if you’d like—you don’t have to convert everything all at once.

When it’s a good idea: Roth IRA conversions can be a good idea if you already have extensive retirement savings in other accounts. 

This is an especially valuable strategy if you still have plenty of time until you plan to retire. 

You’ll pay taxes now when you convert the account, but the many years of tax-free growth should make up for it.

Backdoor Roth IRA

What it is: A Backdoor Roth IRA is a strategy that involves opening and contributing to a traditional IRA and then converting it into a Roth IRA—essentially creating a “backdoor” to owning a Roth IRA.

How it works: The process starts by opening a traditional IRA (assuming you don’t already have one) and making contributions to it. 

Then, after the money has been transferred, you can convert the account into a Roth IRA. 

If done properly, there should be little to no tax due on the conversion since you have already paid taxes on the money you contributed.  

When it’s a good idea: A regular Backdoor Roth Conversion is a good idea when your income is too high to contribute to a Roth IRA. 

It’s most effective if you don’t already have other retirement accounts since it involves opening a brand new account (which can be redundant if you already have other retirement accounts). 

Mega Backdoor Roth Conversion

What it is: A mega backdoor Roth conversion is a strategy that allows you to contribute much more money into a Roth account than the standard Roth IRA or Roth 401(k) limits typically allow. 

It involves making after-tax contributions to a 401(k) plan and converting it into a Roth IRA or Roth 401(k), enabling your retirement funds to grow tax-free.

How it works: First, you contribute the maximum to your 401(k) through regular salary deferrals (up to $23,500 in 2025 if you’re under 50). 

If your plan allows it, you can also make additional after-tax contributions. 

After making those after-tax contributions, you convert them to a Roth account, either within the 401(k) or by rolling them over to a Roth IRA. 

Once the money is in the Roth account, it grows tax-free, and qualified withdrawals in retirement are also tax-free.

The timing here is critical, which is why it can be advantageous to speak with a financial advisor to ensure you make the right contributions at the right time.

When it’s a good idea: A mega backdoor Roth conversion is a good idea if you want to continue padding your retirement accounts but have already maxed out your 401(k) and other accounts. 

However, this strategy is contingent on your employer’s 401(k) plan allowing for after-tax contributions and in-plan Roth conversions.

Getting Started: Roth IRA for High-Income Earnings 

You won’t need to worry about using these strategies if your income is below $150,000 (single filer) or $236,000 (joint filer), as you can open a Roth IRA without restrictions. 

But, if your income is over $165,000 (single filer) or $246,000 (joint filer), these strategies can be a smart idea:

1. Opening a Roth 401(k): This plan offers most of the benefits of a Roth IRA but is only an option if your employer offers it.

2. Roth Conversions: If you already have another retirement account, you can most likely convert it into a Roth IRA. You’ll have to take a tax hit in the short term, but will enjoy long-term tax-free growth.

3. Backdoor Roth IRA: If you don’t have any other retirement accounts, you can always open and contribute to a traditional IRA before converting it to a Roth IRA.

4. Mega Backdoor Roth IRA: This strategy involves making after-tax contributions to a 401(k) plan and then converting that plan into a Roth IRA or Roth 401(k). However, it’s only an option if your employer allows for after-tax contributions.

It’s important to remember that these are just general strategies. 

For personalized advice about the best retirement strategies for high earners, be sure to contact the ARQ Wealth team by calling (480) 214-9572.