How to use after-tax contributions to save for early retirement - Business Insider

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I'm a financial advisor to high-income earners at Google, Salesforce, and Microsoft. Here's where I tell them to put their money to set themselves up for early retirement.

super saversI work with many clients who make more than $1 million a year at prominent tech companies like Google, Salesforce, and Microsoft. Their income is so high relative to the 401 limit that they can max out their annual contributions with a single paycheck in January. But they often want to retire early and can save more than 30% of their income.

How can they save so much in just 10 years with a $19,500 limit? An incredible savings opportunity made available by select employers called aWhile you are limited to $19,500 when it comes to your own traditional or Roth contributions, the total contribution limit from all sources — such as your employer match — can amount to as much as $57,000 this year.

For example, if you are under 50 years old and your employer contributes $5,000 to your 401 account, you can add $32,500 as an after-tax contribution after maxing out your regular 401 contribution . When compared to a normal taxable account, the tax savings of a mega backdoor Roth IRA could amount to tens or even hundreds of thousands of dollars — that's a lot of money to cover your dream retirement!

 

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