Estimated tax tip savings: Even if you’re a high-income earner, a simple strategy can allow you to contribute to a Roth retirement account for tax-free growth of your investments. Over a lifetime, this could provide you with thousands—or even hundreds of thousands—of extra dollars for you to use at retirement age.

Roth individual retirement accounts (Roth IRAs) are terrific; they let you save for retirement without having to pay tax on the income from your investments. That can turn into a huge gift from the government.

For example, watch what happens when you make a onetime contribution of $5,000 at age 20 and withdraw that money at age 65. With 7 percent growth each year, that onetime contribution of $5,000 turns into $105,0001—and you do not have to pay a cent of taxes when you withdraw the funds. That’s $100,000 of income completely tax-free ($105,000 - $5,000)!

However, when you try to make your contribution, you may discover a small problem—if you’re a high-income earner, lawmakers prohibit you from contributing directly to a Roth IRA.

Why is this prohibition only a “small” problem?

Congress recently opened up two lovely loopholes that are practically invitations to fund your Roth IRA through alternative means.

For business owners, there are two effective ways to do this:

The “backdoor Roth IRA”

The solo Roth 401(k)

Both are common techniques that are not difficult to accomplish, but you’ll want to watch out for a few traps so you ... Log in to view full article.