I make $400k and am an avid saver for retirement – when do I stop flooding Roth accounts and focus on my tax deferred ones?

Planning for retirement is something everyone, regardless of income, needs to take seriously, but for high-income individuals, it really is a case of “mo’ money, mo’ problems.”

The reason is the wealthy have more options available to them to shield their income and position themselves for a more comfortable retirement. 

This issue was brought to light by a Redditor on the r/chubbyFIRE subreddit who is 30 years old and is looking for early retirement at 40. With gross household income of $400,000, he has a mix of pre-tax Roth IRA accounts and real estate that generates about $1,800 a month in passive income, but is expected to grow over time. His net worth is about $1 million currently with the expectation to be $4 million at retirement.

The Redditor wants to know when to stop flowing money into his Roth accounts and start focusing on his tax-deferred accounts that will create a bridge of income for him when he retires until he turns 59-1/2 and can start withdrawing money his his Roth IRAs.

The rich are very different from you and me

While everyone is familiar with a Roth IRA with its contribution limits of $7,000 a year in 2025, as I mentioned at the start, high-income individuals have more options. The Redditor, because he is a sole proprietor and his business is organized as an S-corporation, he has available to him what is known as a solo 401(k) Roth IRA — also known as an individual 401(k) — which has $230,000 in it. It allows for him to contribute as much as $69,000 a year into the account.

Moreover, he is able to take advantage of regulations that allow for what is known as a mega backdoor Roth that allows for contributions for individuals with incomes above a certain threshold who are only able to make partial contributions. The mega backdoor Roth allows for $46,000 in extra contributions to a Roth, which can then be rolled into his solo 401(k).

I’m not a financial planner or tax professional, so these are only my opinions, but you have to be careful with such strategies because their are complex tax consequences involved. It is why you need to talk with professionals in the field because they can best guide you on how to avoid or minimize any taxes due.

Timing the correct moves

Broadly speaking, the Redditor should continue maximizing his contributions to tax deferred retirement accounts while he can. Additionally, since he has a high income they can make significant contributions through the mega backdoor Roth.

The tax-free growth and withdrawals in retirement will be highly beneficial in a Roth, particularly because he plans to retire early.

As he approaches retirement at 40, he might consider allocating more funds to tax-deferred accounts (like a traditional 401(k) or IRA) to create the bridge he seeks for income before age 59-1/2. This is especially true if he utilizes a Roth conversion ladder. That’s when you gradually move funds from a pre-tax retirement account to a Roth IRA over multiple years, minimizing tax implications.

For his real estate holdings, they can provide him with a significant source of income, and as the passive income grows, it could reduce his reliance on retirement accounts for early retirement.

He could also reinvest some of that real estate income to further build out his portfolio, providing additional cash flow.

When he should do this is another question, but a rule of thumb suggests to start shifting focus to tax-deferred accounts around age 35 or when his Roth accounts reach around $500,000). It will allow him to build a solid tax-deferred base while still benefiting from Roth contributions.

Key takeaway

Having more money does make life a bit easier, but it also raises a host of questions and a new set of problems that those with lower incomes won’t ever face. 

Mae West is reported to have said, “I’ve been rich and I’ve been poor, and rich is better.” It is also more complicated. Navigating the complex labyrinth of the tax code is not for the faint of heart. Assembling a competent team of financial planners, tax professionals, and even lawyers is essential to avoid the pitfalls of having mo’ money.