When it comes to building wealth, the ultra-wealthy aren’t just saving money — they’re strategically maximizing every financial tool at their disposal. One of their favorite vehicles? The Roth IRA.
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Here’s what financial experts say the 1% are doing right and how you can follow their lead, even without a seven-figure income.
The wealthy understand that timing matters when it comes to Roth contributions.
“By contributing the annual maximum limit early in the year rather than spreading it out, they allow the investment to compound and grow tax-free for a longer period,” said Arron Bennett of Bennett Financials.
Even if you can’t contribute the maximum, starting early gives your money more time to grow. According to Bennett, you can automate your contributions to ensure you’re consistently funding your Roth IRA.
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Income limits don’t stop the wealthy from accessing Roth benefits.
“Even individuals whose salaries actually exceed the Roth IRA contribution limits can contribute with a ‘Backdoor Roth,’” explained Anthony DeLuca of RetireGuide. “This involves contributing non-deductible money into a traditional IRA and then converting these funds into the Roth.”
The 1% often think beyond traditional investments.
“Many of the wealthiest individuals use a self-directed Roth IRA, which allows them to invest in a wide variety of alternative assets — such as real estate, private equity and even cryptocurrency,” Bennett said.
Smart timing can lead to significant tax savings.
“Ideally, you would want to invest in a Roth IRA when you are in a lower tax bracket. Once your salary grows, deferring taxes into a traditional 401(K) or IRA becomes a better tax strategy option,” DeLuca explained.
The wealthy understand that tax-free withdrawals can be crucial for managing healthcare costs.
“The average cost of long-term healthcare in America ranges from $35,000 to $108,000 a year. Having a Roth IRA bucket is so valuable, because money can be pulled for this without paying unnecessary taxes,” DeLuca said.
The 1% leverage Roth accounts for generational wealth transfer.
“Roth IRAs don’t have required minimum distributions (RMDs) during the owner’s lifetime, so the account can keep growing tax-free. Plus, when passed on to heirs, the withdrawals remain tax-free for them, as well,” Bennett explained.
