Finance Maxxing
Retirement Accounts
Roth IRA
After-tax contributions with tax-free growth and withdrawals.
Roth IRA contributions are not tax-deductible, but qualified withdrawals are completely tax-free.
Key Advantages
- Tax-free growth and qualified withdrawals
- No RMDs during the owner's lifetime
- Contributions (not earnings) can be withdrawn penalty-free at any time
- Provides tax diversification in retirement
Income Phase-Outs (2025)
| Filing Status | Full Contribution | Phase-Out | No Contribution |
|---|---|---|---|
| Single / HOH | MAGI < $150,000 | $150,000–$165,000 | > $165,000 |
| MFJ | MAGI < $236,000 | $236,000–$246,000 | > $246,000 |
Backdoor Roth Strategy
For high earners above the income limit:
- Contribute to a non-deductible Traditional IRA ($7,000)
- Convert to Roth IRA (immediately or shortly after)
- Pay tax only on any gains between contribution and conversion
- Result: Roth IRA contribution despite being above the income limit
Warning: The pro-rata rule applies if you have existing pre-tax IRA balances. Consider rolling pre-tax IRA funds into a 401(k) first to avoid tax on the conversion.
Sources
Related Terms
More in Retirement Accounts
401(k) / 403(b) / 457(b)
Employer-sponsored retirement plans with tax-deferred growth.
Traditional IRA
Tax-deductible contributions with tax-deferred growth.
Health Savings Account (HSA)
Triple tax-advantaged: deductible, tax-free growth, tax-free withdrawals.
Traditional vs. Roth
Pre-tax now vs. tax-free later — depends on future tax rate.
Roth Conversion
Moving pre-tax retirement assets into a Roth account.
Required Minimum Distributions (RMDs)
Mandatory annual withdrawals from pre-tax retirement accounts.
529 College Savings Plan
Tax-free growth for education expenses; state deductions may apply.