When you make more than you spend, one financial goal is to make annual retirement savings up to your contribution limits. Even so, many of you high earners still won’t save enough to maintain your current living standards during retirement. To help achieve your retirement goals, you’ll need to do even more.

For instance:

Assuming real annual growth of six percent, maximum contributions of $19,000 to a 401(k) might grow to around two million dollars at retirement based off of saving for 33 years.
After you retire, you may adhere to typical guidelines of withdrawing four percent. From there, you can expect an annual income of about $80,000 to last for 40 years.

But what if you’ll need more than $80,000 a year to maintain your comfortable lifestyle? You’ll need to expand your retirement planning to include other investments. Let’s consider some alternative retirement savings vehicles to see which ones will provide you with the highest retirement income. From municipal bonds to backdoor IRAs to HSAs, we will help you understand how to maximize your retirement savings.

(This information is hypothetical and is provided for illustrative and informational purposes only. It is not intended to reflect the performance of any specific investment, or security and is not representative of any particular structure or situation.)

Backdoor Roth IRA

If you think tax rates may increase or your income may be even higher in the future, tax-free retirement income should interest you. If your income exceeds a certain threshold, you can’t make the type of Roth IRA contributions that allow you to pay taxes now in exchange for tax-free withdrawals in the future. For instance, a couple who earns over $203,000 and files jointly would exceed this level in 2019.

However, you still might have a chance to take advantage of a backdoor IRA. A backdoor IRA refers to converting a traditional IRA to a Roth IRA. With a traditional IRA, you defer taxes on contributions but may incur a tax liability upon withdrawal. A Roth IRA works the other way, so you can make qualified withdrawals without paying taxes upon contributions or growth.

You do have to take immediate tax consequences into account when you consider the conversion; however, you’ll still get to enjoy tax-free withdrawals after retirement. Speak with a Magellan financial specialist about your particular situation and how to complete a backdoor Roth IRA conversion to maximize these benefits.

Wells Fargo Advisors Financial Network is not a tax or legal advisor. Be sure to consult with your own tax and legal advisors before taking any action that may have tax or legal consequences.

Municipal Bonds

Generally, local and state governments sell municipal bonds to finance public projects. You may find them handy for retirement planning because they’re usually exempt from federal taxes. In some cases, they’re also exempt from local and state taxes.

The tax advantages can make municipal bonds a good choice for people in higher tax brackets. As with IRAs, you should generally consider a municipal bond as a long-term investment because profiting early can result in capital gains taxes.

Universal Life Insurance

Universal life insurance policies can offer you both permanent life insurance and a retirement savings vehicle. Your insurer will pay your beneficiaries a death benefit. At the same time, your policy’s cash account can grow into an asset you can use while you’re still alive. You also don’t need to wait until your 59 1/2 to make withdrawals, making it an option if you plan to retire early or want to save for another goal besides retirement.

Some investors don’t like the idea of using insurance as savings. Still, with the right policy and account management, these policies can offer tax advantages. For instance, you can defer taxes upon your contributions and still retain access to your capital. Likewise, the death benefit won’t generate any more taxes for your heirs.

Insurance products are offered through nonbank insurance agency affiliates of Wells Fargo & Company and are underwritten by unaffiliated insurance companies.

After-Tax 401(k)

Unlike with a Roth account, the government taxes after-tax 401(k) contributions. After you retire, you can roll your after-tax contributions into a Roth IRA to enjoy tax-free withdrawals, and you can roll earnings into a traditional IRA to get a deduction.

In 2019, you can contribute up to $56,000, giving you a great opportunity to increase retirement savings. As described in the Morning Star, you can later convert your after-tax contributions into Roth contributions. This is another way to enjoy many of the benefits of a Roth IRA after you’ve already maximized your current Roth contributions.

Please keep in mind that rolling over your qualified employer sponsored retirement plan (QRP) assets to an IRA is just one option. You generally have four options for your QRP distribution: Roll over your assets into an Individual Retirement Account (IRA); Leave assets in your former employer’s plan, if plan allows; Move assets to your new/existing employer’s plan, if plan allows; Take a lump sum distribution and pay the associated taxes.

Taxable Accounts

The strategies described above attract high earners because of their tax benefits. While you should always consider the tax impact of retirement planning, you might add taxable accounts into your mix because of their other benefits. For instance, you may want to build more flexibility and liquidity into taxable accounts that you can use to invest in new opportunities or withdraw from when you need cash.

With taxable accounts, you will get taxed upon income or capital gains upon withdrawals. That’s true even if you withdraw them to reinvest. You should also consider some taxable accounts as medium- to long-term savings because you may enjoy a lower capital gains tax if you hold them for at least a year.

Other Retirement Savings Ideas for High Earners

Besides these somewhat more conventional strategies to save for retirement, you might consider a few other solutions that might benefit you in certain situations:.

Health Savings Accounts

You may understand that health savings account offer a tax-advantaged way to save for healthcare costs. Some financial experts refer to them as “single-purpose IRAs” because they’re meant to fund healthcare costs. You contribute pretax dollars, get tax-free compounding, and take tax-free withdrawals for any qualified medical expenses.

Even better, you spend non-HSA assets on your healthcare expenses and leave your HSA alone to grow. Even if you save a lot more than you need by the time you qualify for Medicare, you can still take your money out without a penalty once you reach 65. You won’t have to pay income tax at all if you take the money out for out-of-pocket medical expenses.

Pensions

If you own a business, you could consider creating a pension or defined benefit plan. Some organizations have dropped pensions because of expenses and future liability. Still, they can work well for some small business owners who earn large incomes.

Benefit From the Guidance of Retirement Planning Specialists

Do you need to exceed tax-advantaged contribution limits to reach your retirement goals? If so, find out how you can make the most of additional retirement savings. For expert guidance for your individual situation, schedule a chat with one of our team members here at Magellan. You can also call on our toll free phone number: 1-888-437-5650. We’re here to help you use your hard-earned money to enjoy the retirement you dream about.

An experienced financial advisor will help evaluate your current financial situation, define retirement goals, and provide direction. At Magellan Financial, we’re here to help. You can take the first step towards your comfortable retirement by emailing us today. Once you tell us a little bit about yourself, we’ll tell you how people just like you achieved their goals.

The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates The material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.

When considering rolling over your QRP assets, key factors that should be considered and compared between QRPs and IRAs include fees and expenses, services offered, investment options, when you no longer owe the 10% additional tax for early distributions , treatment of employer stock, when required minimum distributions begin and protection of assets from creditors and bankruptcy. Investing and maintaining assets in an IRA will generally involve higher costs than those associated with QRPs. You should consult with the plan administrator and a professional tax advisor before making any decisions regarding your retirement assets.