Alright, let me break down the Roth IRA magic for you:

Think of the Roth IRA as the superstar of retirement accounts. You pay your taxes upfront, but when you retire, you can withdraw all that moolah tax-free – if you’re at least 59½ and you’ve had the account for five years. What’s more? That money keeps growing tax-free ’cause, unlike other accounts, the government can’t make you start withdrawing at 72.

Here’s the tricky bit, though: Only those making $138,000 or less in 2023 (or $218,000 if you’re married) can throw money into a Roth IRA. And, you can only chuck in $6,000 a year ($7,000 if you’re 50+). Earn between $138,000-$153,000 ($218,000-$228,000 for couples) and that limit shrinks.

Peter Locke from the InSight Center for Awesome Tax Strategy says, “Lots of high earners can’t put their money straight into a Roth because of these income limits.” But, there are alternative ways for the big earners to be part of this tax strategy:

Roth 401(k): If your job offers this, there’s no earnings cap. You can put in $20,500 in 2022 or $27,000 if you’re 50+. The catch? Unlike Roth IRAs, you’ve gotta start pulling money out at a certain age

Roth Conversion: If you’ve got a traditional IRA, you can flip that money into a Roth. But, you’ll need to pay taxes on it. Pro tip: Spread this out over the years to lessen the tax sting. There’s a fancy “pro rata rule” if your IRA has mixed contributions.

Backdoor Roth: Earning too much? Put money into a traditional IRA then, surprise, switch it to a Roth. Remember the pro-rata rule though!

Mega-backdoor Roth IRA: This one’s a bit of a dance:

   – First, fill up your regular 401(k) till it’s bursting.

   – Then, stash after-tax cash till you hit the $61,000 limit in 2022 ($67,500 if you are above 55).

   – Now, quick! Move those funds into a Roth IRA. Do it fast so you’re not taxed on any gains.