Personal Finance

Ask a Fool: My Income Is Too High to Invest in an IRA. What Should I Do?

Q: I'll make too much in 2019 to invest in a Roth IRA or take a traditional IRA deduction, but I want to invest more for retirement. What's the best alternative?

First off, if you're ineligible for a traditional IRA deduction, that means you (or your spouse) has a retirement plan at work. If it's a defined contribution plan, such as a 401(k) or 403(b), the best answer could be to simply increase your contributions to it. In 2019, you can choose to defer up to $19,000 of your salary in a qualified retirement account, and if you're 50 or older, this limit goes up to $25,000.

Next, if any of your income is from self-employment or independent contractor work, there could be several options available to you.

A SEP-IRA , for example, could allow you to save as much as $56,000 ($62,000 if you're 50 or older) or 25% of your self-employment income, whichever is less. SIMPLE IRAs and individual 401(k)s are also worth a look if this applies to you.

Another option is a health savings account (HSA). If you have a qualifying high-deductible health insurance plan, you can contribute to one of these double-tax-advantaged investment accounts.

Not only are your qualified contributions tax-deductible, but any money in the account that you use to pay for qualified healthcare expenses is 100% tax-free to withdraw. With the average lifetime out-of-pocket healthcare costs for a 65-year-old retired couple estimated at $280,000 by Fidelity, this could be a great way to save and invest for this purpose.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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