Think You Make Too Much for a Roth IRA? Not Necessarily.

[William Thompson]

I have a lot of real estate investors with W-2 income or business income ask me the same question:

“What else should I be investing in besides real estate?”

A Roth IRA comes up a lot. And then I hear this right away:

“I make too much for that.”

Not always.

A lot of higher-income investors don’t realize there may be a way in through what people commonly call the backdoor Roth. The basic idea is making a nondeductible traditional IRA contribution and then converting it to a Roth IRA. Direct Roth IRA contributions do have income limits, but Roth conversions themselves work under a different set of rules.

Now, this is where I tell people not to get too excited too fast.

There are rules. And if you already have pre-tax money sitting in traditional, SEP, or SIMPLE IRAs, that can change the outcome because of the pro rata rule. That’s the part a lot of investors miss.

So yes, if you're a real estate investor with strong income, you may still have a path to build money on the side in a Roth environment. You just want to make sure you understand the setup before you do it. IRS guidance for 2026 shows direct Roth IRA contribution phaseouts at $153,000 to $168,000 for single filers and $242,000 to $252,000 for married filing jointly, which is exactly why this conversation keeps coming up.

Curious how many investors here have looked at the backdoor Roth and how many assumed they made too much and stopped there?

[David Krulac]

@William Thompson And don't forget the Solo 401K, for which a portion may be Roth Solo 401K. Real Estate agents/licensees have an opportunity to set up a Solo 401K, as well as anybody else who has a business that employes no other full time employees. The contribution levels are much higher than an IRA, and also carry an over 50 age additional contribution. For 2026 the IRA contribution limits are $7,500 (less than 50 yeras old) and $8,600 (for age 50+).

However, the Solo 401K limits are $72,000 (less than 50 years old), $80,000 ( age 50+) and $83,250 ( for ages 60-63 only). The contributions for the Solo 401K are almost 10X the IRA contribution limits, but the larger contributions allow for pumping more money into tax deferred and tax free and participate in more real estate investments.