Contribute to a backdoor Roth IRA
Claimed by 20% of physicians.
Who’s eligible: Anyone who wishes to contribute to a Roth IRA but is not allowed to do so because their income is too high.
How it works: High earners typically don’t qualify for contributions to a Roth IRA, in which contributions go in after taxes but grow tax-free and distributions in retirement are also tax-free. But there are no income requirements for making after-tax contributions to a traditional and then converting it to a Roth IRA.
There are, however, complex tax rules for those who also have a traditional IRA that’s funded with pre-tax dollars. If that’s the case, work with a tax pro or financial advisor to determine whether a backdoor Roth conversion is the most tax-efficient approach for your situation.
Pro tip: A growing number of workplace retirement plans now include an option for Roth contributions. There are no income limits on a Roth 401(k), so contributing to that type of an account could be a smart route for taxpayers for whom a backdoor conversion doesn’t make sense.
A version of this article appeared on Medscape.com.