Retirement Accounts

Retirement accounts are one of the most powerful tax reduction tools available to high earners, and they’re frequently underutilized — not because high earners don’t contribute to their 401(k), but because they’re often unaware of the full menu of options available beyond the standard employee contribution. For high earners, the additional vehicles — backdoor Roth IRA, mega backdoor Roth, defined benefit plans, health savings accounts — can add tens of thousands of additional dollars in annual tax-advantaged savings.

The 2024 401(k) employee contribution limit is $23,000 ($30,500 for those 50 and older). Many plans allow after-tax contributions above this limit up to the total plan limit of $69,000 — and plans with the right distribution provisions allow those after-tax contributions to be converted to a Roth IRA immediately (the “mega backdoor Roth” strategy), adding up to $46,000 in additional Roth savings annually for high earners whose plans permit it. This strategy is worth verifying with your plan administrator and tax advisor, as plan rules vary significantly.

The backdoor Roth IRA — making a non-deductible traditional IRA contribution and converting it to Roth — remains available to high earners despite the income phase-out that eliminates direct Roth IRA contributions above $240,000 (MFJ). The strategy works cleanly when the contributor has no pre-existing pre-tax IRA balances; the pro-rata rule complicates the conversion tax calculation when prior IRA balances exist. A $7,000 annual backdoor Roth contribution ($8,000 for 50+) is modest but compounds meaningfully over a multi-decade career.

Self-employed high earners and business owners have access to SEP-IRAs (up to $69,000 in 2024) and Solo 401(k)s with similar contribution limits. Defined benefit pension plans — available to solo business owners — can shelter $100,000–$300,000+ annually depending on age and income, making them the highest-impact vehicle for late-career self-employed professionals. The interaction with business structure is covered in business taxes. The Tax & Wealth pillar covers retirement accounts as part of the complete picture of high-income tax strategy.