3 Strategies a $320K Executive's
CPA Never Mentioned
The Situation
Sandra is a senior director at a publicly traded company in Los Angeles. Her W-2 for 2024 showed $320,000 in total compensation — base salary, annual bonus, and a vesting tranche of RSUs. She has a CPA she's worked with for six years. She maxes out her 401(k) every year. She assumes she's doing everything right.
When she came to RCA for a second opinion, we found three strategies her existing CPA had never raised. Combined, they reduced her effective federal tax rate from 29.4% to 23.1% — a difference of more than $20,000 in tax for that single year.
The 3 Strategies
At $320K in income, Sandra is well above the Roth IRA income limit ($161,000 for single filers in 2024). Most high earners assume they simply can't contribute to a Roth IRA. They're wrong.
The backdoor Roth IRA is a two-step process: (1) make a non-deductible contribution to a traditional IRA ($7,000 in 2024, $8,000 if age 50+), then (2) convert it to a Roth IRA. The conversion is not a taxable event if done cleanly — the contribution has no basis because it was already after-tax.
The long-term impact: Roth accounts grow tax-free and have no required minimum distributions. For someone in Sandra's tax bracket, every dollar shifted into a Roth now avoids ordinary income tax on all future gains — potentially saving six figures over a 20-year horizon.
Caveat: The "pro-rata rule" can create a taxable event if you have pre-tax IRA balances. This needs to be modeled for your specific situation.
Sandra's employer 401(k) plan allowed after-tax contributions — a feature most employees never discover because HR doesn't advertise it. In 2024, the total 401(k) contribution limit (employee + employer + after-tax) is $69,000. Sandra was only using $23,000 of that (the standard employee pre-tax limit).
With her employer's match, she had room for approximately $30,000 in additional after-tax contributions. Her plan also allowed in-service distributions, meaning she could convert those after-tax dollars to a Roth account — either within the plan or via rollover to a Roth IRA.
Result: An additional $30,000 per year flowing into tax-free Roth growth, with no income limit and no impact on her pre-tax 401(k) contribution.
This strategy only works if your employer's plan allows after-tax contributions and in-service withdrawals or conversions. Not all plans do — it requires a quick check of the plan document.
Sandra's company offered a Non-Qualified Deferred Compensation (NQDC) plan, which allowed her to defer a portion of her bonus into future years — to be paid out when she elects, including into retirement when her tax bracket would likely be lower.
She had been ignoring the enrollment window each year because her CPA never flagged it as a meaningful planning lever. By deferring $40,000 of her 2024 bonus into a NQDC payout scheduled for age 65, she removed $40,000 from her 2024 taxable income immediately.
At her marginal rate of 35% federal + 9.3% California, that single deferral saved approximately $17,700 in current-year taxes — real dollars that remain invested and compounding rather than going to the IRS now.
NQDC plans carry counterparty risk (you're an unsecured creditor of the employer). This is an important consideration for planning — not a reason to avoid the strategy, but a reason to structure it thoughtfully.
The Combined Impact
| Strategy | Income Sheltered / Tax Saved |
|---|---|
| Backdoor Roth IRA | $7,000 sheltered from future tax |
| Mega Backdoor 401(k) | $30,000 shifted to tax-free growth |
| NQDC Bonus Deferral | ~$17,700 current-year tax saved |
| Effective Rate Change | 29.4% → 23.1% (−6.3 pts) |
None of these strategies require Sandra to change jobs, take on risk, or do anything aggressive. They use tools that already exist inside her employment and retirement structure — they just required someone to look for them.
Key Takeaways for W-2 High Earners
- Maxing your standard 401(k) is a floor, not a ceiling. Most high earners have room for significantly more tax-advantaged savings.
- The backdoor Roth IRA is available to any W-2 earner regardless of income — the contribution limit is modest, but the long-term compounding benefit is substantial.
- Your employer's benefits package likely contains planning opportunities that HR doesn't highlight and most CPAs don't ask about. NQDC plans, mega backdoor 401(k) access, and HSA contribution room are commonly overlooked.
- RSU vesting creates taxable income in the year of vest — that event should trigger a planning conversation, not just a withholding calculation.
- California's 9.3%–13.3% marginal rate means every dollar deferred or shifted to Roth is worth significantly more in CA than in zero-income-tax states.
Find Out What Your CPA
Hasn't Brought Up Yet
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