Max Out Your Roth IRA

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In addition to your 401k, you can open up a separate Individual Retirement Account — more commonly known as an IRA. It's another tax advantaged account that you can setup outside of your employer.

They come in two flavors: Traditional or Roth. As a Software Engineer, however, you'll probably be restricted due to income limits. As an individual:

To get around this, you'll have to make a backdoor Roth IRA contribution. It's a tax loophole that will let you max out your Roth IRA every year. It basically involves:

  1. making an after-tax, non-deductible contribution to a Traditional IRA
  2. converting the contribution to a Roth IRA
  3. paying taxes on the contribution and any taxes on gains while it was in your Traditional account

As of 2020, the maximum contribution you can make per calendar year to a Roth IRA is $6,000.

For more information, read How to Set Up a Backdoor Roth IRA.

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