I am a high earner who may find myself in an odd situation where I will have W2 income but no 401k offered. It seems, if I am understanding correctly, I will only be able to save in a back-door Roth IRA, HSA, and brokerage account. I am going to try and secure some 1099 income. If I can't, would putting large chunks into a brokerage account be the best choice? Thank you for your help
W2 income without 401k for a high earner
byu/killinmesmall inpersonalfinance
Posted by killinmesmall
9 Comments
Or a traditional IRA.
You can also open a SEP IRA if you have 1099 income – check the rules about how much you can contribute
Yup you’ve got that all correct. Also HSA if enrolled in a HDHP.
Does your employer simply not offer a 401k? See if you can convince them to start one, using this resource as an aide [https://www.bogleheads.org/wiki/How_to_campaign_for_a_better_401(k)_plan](https://www.bogleheads.org/wiki/How_to_campaign_for_a_better_401(k)_plan)
If you do not have an employer sponsored retirement plan, you can always deduct traditional IRA contributions.
At that point start with a brokerage or something else to get some investment point started don’t overthink it
Yes, you just put the rest in a taxable brokerage account once the backdoor Roth is exhausted.
It is worse than a tax advantaged account, but that’s fine because you are a high earner and more money is still better than less money even if you get less tax benefits.
I used my wife’s 401K and absolutely maxed that out, then a deferred comp plan that was offered when my own ability to contribute was capped because I was an HCE, from there I just did my brokerage with after tax dollars.
I was able to get my wife’s 401K up to a decent number though, in a pretty short amount of time.
Your options are limited if you only have W2 income, however depending on how much 1099 income you earn, a SEP or a solo 401k may make more sense. Look into both.
Brokerage account savings is very underrated. Whenever I suggest it tons of people give me grief. I still stand by the recommendation. If you want to retire early there is no substitute.