Financial Planning

By David C. D’Albero, Co-Founder, Strata Capital

For high-income earners, saving for retirement is rarely about lack of discipline. It’s usually about finding the right strategy that aligns with tax rules, compensation complexity, and long-term goals. Roth IRAs offer one of the most tax-advantaged paths to grow wealth, but for many executives, the traditional route is closed off due to income limits.

Here’s the good news: there are still several creative, legal, and strategic ways to build tax-free retirement income using Roth IRAs. I broke these down in a recent video, which you can watch here:

Click here to watch the full video

These aren’t fringe strategies or loopholes. They’re often overlooked because they involve a few extra steps and require more coordination than simply checking a box on your 401(k). That’s exactly why they’re powerful.

Let’s walk through the three most effective Roth IRA strategies high-income earners should be considering right now.

Strategy 1: Mega Backdoor Roth via After-Tax 401(k) Contributions

If your employer’s 401(k) plan allows after-tax contributions and in-service rollovers, you’re sitting on one of the most valuable Roth opportunities available today.

Here’s how it works. You start by maxing out your pre-tax 401(k) contributions. In 2026, the limit is $24,500 if you’re under 50, $32,500 if you’re 50 or older, and $35,750 if you’re between ages 60 to 63 due to a special catch-up provision. Once that’s done, some employer-sponsored plans let you contribute additional after-tax dollars above that limit. The total combined contribution cap (employer and employee) is $72,000 for 2026.

New for 2026: Roth Only Catch-Up Contributions for High Earners

If you earned $150,000 or more in the previous year, any catch-up contributions you make (whether you are age 50 or older or eligible for the expanded “super catch-up”) must now go into a Roth account if your plan offers one.

The real magic happens when those after-tax contributions are rolled into a Roth IRA. This move converts future investment growth into tax-free income during retirement. If your employer permits in-service rollovers, you may be able to move the after-tax dollars out of the plan into a Roth IRA on a recurring basis. That prevents those funds from sitting in a taxable account and lets them grow tax-free instead.

For example, if you contribute an extra $20,000 in after-tax funds and roll that into a Roth IRA each year for five years, you’re potentially setting up $100,000 of principal for decades of tax-free compounding. This is especially useful for corporate professionals already maximizing their traditional retirement savings and looking for new ways to build long-term wealth.

Not every plan offers this, so it’s worth checking your employer’s summary plan description or talking with a financial advisor who understands your specific 401(k) rules.

Strategy 2: Backdoor Roth IRA Contributions

If your income is above the IRS limit for Roth IRA contributions, the backdoor Roth strategy remains one of the cleanest ways to contribute. It’s a two-step process.

First, you make a non-deductible contribution to a traditional IRA. In 2026, that’s $7500 if you’re under 50, or $8600 if you’re over 50. Then, you convert that contribution into a Roth IRA. Since the original contribution was made with after-tax dollars, the conversion should have minimal or no tax impact.

There is one caveat. The IRS applies the pro rata rule across all of your IRAs. If you have other traditional, SEP, or SIMPLE IRA balances that include pre-tax dollars, your conversion will be partly taxable. For example, if you have $50,000 of pre-tax money in a traditional IRA, and you try to convert $7500 of after-tax contributions, the IRS will view that $7500 as a mix of pre-tax and after-tax funds. That changes the tax math quickly.

This strategy works best when you don’t already have money in other IRAs, or if you’ve moved those balances into a 401(k) before doing the backdoor conversion. If that sounds complicated, it can be. This is one of those strategies that should be coordinated with a tax advisor or CPA who can help you navigate the reporting correctly.

When done properly, the backdoor Roth contribution is an elegant way to fund tax-free retirement growth, even for those well above the income limits.

Strategy 3: Opening a Roth IRA for Your Child

For many high-income families, legacy planning isn’t just about estate taxes and asset transfers. It’s about giving your children a foundation in financial literacy and long-term wealth building.

One strategy that rarely gets the attention it deserves is opening a Roth IRA for your child. Yes, it’s allowed – as long as your child has earned income.

Earned income can come from traditional jobs like working at a family business or summer employment, or even non-traditional income like babysitting, tutoring, or lawn care, as long as it’s documented. The contribution limit is the lesser of your child’s earned income or the annual IRA limit.

Let’s say your 15-year-old earns $2,000 mowing lawns. That $2,000 can be contributed into a Roth IRA. They may not realize it now, but that one deposit has the potential to grow into more than $100,000 by retirement, assuming a 7 percent annual return. That’s with no further contributions.

If they contribute just $2,000 annually for five years starting at age 15, the long-term tax-free growth potential is extraordinary. You’re helping them build wealth, yes, but you’re also planting seeds of financial education that last a lifetime.

Many parents and grandparents choose to fund these contributions as gifts. That’s completely fine, as long as the child has verifiable earned income to justify the contribution. It can be a powerful way to create generational financial momentum.

Roth Strategies in a Shifting Tax Environment

It’s important to remember that tax rules are not permanent. The Roth IRA income limits, contribution thresholds, and rollover rules are all subject to change. With multiple pieces of tax legislation scheduled to sunset or shift by 2026 and beyond, there is some urgency around making the most of what’s currently available.

These Roth strategies don’t require any speculation or exotic investment vehicles. They require coordination, timing, and a clear understanding of your income structure. That’s where working with a professional advisor makes a difference. For high-income professionals already handling stock compensation, deferred compensation, restricted shares, and other corporate benefits, weaving these Roth tools into your larger planning can produce tremendous value over time.

Getting It Right

None of these strategies are inherently complicated, but the details matter. Pro rata rules, in-service rollover timing, and IRA aggregation rules can all trip up even the most financially savvy individual. The cost of making a mistake may be unexpected taxes, lost opportunity, or unnecessary complexity.

That’s why we place so much emphasis at Strata Capital on education and coordination. These aren’t cookie-cutter solutions. They’re well-designed plays in a broader financial game plan.

If you’re interested in implementing any of these Roth strategies or just want help figuring out what fits best into your plan, we’d be happy to walk through it with you.

Roth accounts are powerful, flexible, and often underused. That doesn’t have to be the case for you.

By Carmine Coppola, Co-Founder, Strata Capital

If you’re a high-income earner living in a high-tax state like New York, New Jersey, or California, the new state and local tax (SALT) deduction changes for 2026 may feel like a rare financial opportunity. For many executives, this could be one of the most impactful tax strategy shifts in recent years. That is, if it’s used correctly.

We recently shared a video walking through how this works using real client examples.

You can watch it here

Let’s start with what’s changed. Under the updated tax law running through 2030, individuals and couples with Modified Adjusted Gross Income (MAGI) under $500,000 now qualify for the full $40,000 SALT deduction. Once income passes that threshold, the deduction begins to phase out. By the time income reaches $600,000, it drops back down to the $10,000 cap.

That $100,000 income range opens a narrow, but powerful, window of opportunity. Within it lies the potential to reduce your tax bill while investing more strategically for the future.

Here’s the challenge many executives face. Your income often places you just above that $500,000 line. You’ve likely maxed out your 401(k), your bonus structure pushes you higher, and your tax bill feels like it’s always creeping up. The solution may not require earning less. It may come down to using smarter tools to reduce taxable income and unlock the full benefit of the new SALT rules.

That’s where deferred compensation plans come into play.

Understanding the SALT Deduction Window

Before diving into strategy, let’s talk about why this deduction matters.

The SALT deduction was originally capped at $10,000 under the Tax Cuts and Jobs Act. That change hit high-income earners in high-tax states especially hard. Now, with the new law, significant deductibility has been restored for those under the $500,000 threshold. For every dollar above that, the deduction phases out by 30 cents until it disappears again at $600,000.

Let’s look at three scenarios to illustrate what this means in real dollars:

• A couple earning $625,000 receives only the standard $10,000 deduction.
• A couple earning $550,000 qualifies for a $25,000 deduction.
• A couple earning $493,000 qualifies for the full $40,000 deduction.

The couple at $493,000 ends up with a taxable income that is $160,000 lower than the couple earning $625,000. That’s despite the fact their gross incomes differ by only $132,000. Strategic income positioning can make a significant difference.

Why Deferred Compensation Matters

Reducing income might sound counterintuitive for someone who’s worked hard to reach their current earning level. No one wants to feel like they’re taking home less. The good news is you’re not giving up income. You’re redirecting it into a long-term strategy that reduces your current tax liability while building your future wealth.

A deferred compensation plan allows you to set aside a portion of your income into a tax-deferred investment account. This is often done using your annual bonus or a portion of your base salary. Unlike a 401(k), there’s no IRS limit to how much you can defer. If your employer offers a nonqualified deferred compensation (NQDC) plan, this can be a powerful tool.

In a recent client case, Frank and Maria had a combined income of $600,000. After maxing out their 401(k)s, their MAGI dropped to $553,000. That was still above the $500,000 cutoff, which limited their SALT deduction.

To bring their income below the threshold, Frank deferred $60,000 of his $100,000 bonus into his employer’s deferred compensation plan. His company also provided a 6 percent match. This move lowered their MAGI to $493,000, allowing them to unlock the full SALT deduction.

Here’s how the numbers changed:

• Gross income dropped from $553,000 to $493,000.
• Itemized deductions increased by $15,000.
• Taxable income decreased by $74,000.
• Federal income taxes dropped by about $22,000.
• Their marginal tax bracket shifted from 35 percent to 32 percent.

And remember, that $60,000 wasn’t lost. It was invested for their future in a tax-advantaged environment.

The Overlap of Timing, Strategy, and Tax Policy

It’s not often that tax policy and compensation planning align this clearly. Income management and deduction optimization are typically considered separately. When used together, they create rare financial leverage.

Not every company offers a deferred compensation plan. Among those that do, the features can vary significantly. Some plans provide flexibility around deferral amounts, investment options, or payout schedules. Understanding how to use the plan in the context of your broader financial goals is critical.

We frequently hear executives say they intend to “deal with deferred comp later.” Others worry about deferring income in a volatile market or question whether it’s too complex. These are valid concerns. At the same time, avoiding the conversation altogether often leads to missed opportunity.

A lot of executives are already in motion. Bonuses are paid, elections are made, and the tax year ticks by quickly. The key is to plan ahead. Once a tax year closes, many of these decisions become locked in.

The Strategy Beyond the Numbers

We can talk numbers all day, but many executives are looking for something more than just math. They want clarity, not confusion. They want to feel in control of their financial picture without needing a second job to manage it.

This is especially true for clients who are juggling career pressure, family obligations, and high-level responsibilities. They want a trusted advisor to help them see the whole board, not just move one piece at a time.

Most high earners already feel the pressure to optimize their wealth. What they don’t need is more complexity for complexity’s sake. The goal is not to master tax code overnight. It’s to know what levers are available, and how to use them effectively.

Is This Strategy a Fit?

This type of planning is most effective for those who:

• Earn over $500,000 and live in a high-tax state
• Expect to maintain or grow their income in the coming years
• Have already maxed out traditional retirement contributions
• Work for an employer that offers a deferred compensation plan

If that sounds like your situation, now may be the time to explore how deferred compensation fits into your broader strategy. The rules are in your favor, but only for a limited window. The current SALT deduction structure runs through 2030. Beyond that, future legislation could shift the playing field again.

Aligning Income Strategy with Tax Efficiency

Wealth is not just about accumulation. It’s about alignment. Your compensation structure, your tax strategy, and your investment plan should work together. The updated SALT deduction rule creates an opportunity for high earners to reframe how they think about income and taxes.

By combining deferred compensation with proactive tax planning, you can invest more into your future and reduce your current tax burden. The strategy isn’t about complexity. It’s about clarity and confidence.

By David C. D’Albero, Co-Founder, Strata Capital

Each fall, thousands of corporate professionals breeze through their open enrollment packets with all the enthusiasm of someone renewing a software license. Click, confirm, move on.

This is understandable. The process can feel like a bureaucratic blur of HR-speak, fine print, and boxes to check. Still, within that window lies an extraordinary opportunity to shape your financial future. For corporate professionals with complex compensation structures and high incomes, open enrollment is not just administrative. It is strategic.

To walk through this step by step, watch the full video here

Once that window closes, your decisions are locked in for the year. So it is worth slowing down, asking the right questions, and aligning each choice with a bigger picture.

At Strata Capital, we help corporate professionals navigate the nuanced world of company benefits every day. Here is a closer look at how to make open enrollment work harder for you.

Rethinking Your Health Insurance Strategy

For most people, health insurance is the first decision on the list. Not all plans are created equal, and the best choice often comes down to more than just monthly premiums.

PPOs, or Preferred Provider Organizations, tend to be the most flexible, allowing access to specialists without referrals and out-of-network coverage. They are often best for families who frequently access healthcare and want options without roadblocks, although that flexibility comes at a higher premium.

HMOs, or Health Maintenance Organizations, generally offer the lowest monthly costs, but with tighter rules around provider networks and referrals. They can work well for individuals who prefer a streamlined system and do not need broad access.

High Deductible Health Plans are growing in popularity, especially for those with strong cash flow and minimal expected medical needs. The main draw is access to a Health Savings Account, which allows for triple tax advantages: deductible contributions, tax-deferred growth, and tax-free withdrawals for medical expenses.

For those focused on long-term planning, the HSA can quietly become a stealth retirement asset. After age 65, withdrawals can be used for any purpose and taxed like a traditional IRA.

EPOs and POS plans offer hybrid models with varying levels of flexibility and coverage. These deserve a closer look if neither the PPO nor HMO options feel like the right fit.

The Underappreciated Power of the HSA

HSAs often get overlooked, which is unfortunate considering how versatile they are. In addition to the triple tax benefits, HSAs are portable, rollover annually, and do not expire. For high earners already maxing out retirement accounts, an HSA provides another avenue for tax-advantaged growth.

This strategy tends to work best for those who are relatively healthy, have a financial buffer to cover the higher deductible, and are comfortable viewing the HSA not just as a spending account but as a long-term investment vehicle.

Going Beyond the Basic 401(k)

Most corporate executives are familiar with the traditional pre-tax 401(k) and Roth 401(k) options. The former offers a tax deduction today with taxable withdrawals in retirement. The latter provides no upfront tax break, but future withdrawals come out tax-free.

The third option, often hidden in plain sight, is the after-tax contribution bucket. While it does not reduce current taxable income, it unlocks one of the most valuable wealth-building strategies available to high earners: the Mega Backdoor Roth.

If your plan allows for after-tax contributions and in-service conversions, this approach lets you contribute significantly more than the standard limit and roll those funds into a Roth account. This creates a sizable pool of tax-free income in the future. It requires careful implementation and coordination with your employer’s plan rules, but for those who qualify, it is a strategy worth exploring.

Be Intentional About How Your 401(k) is Invested

Too many executives default into a target-date fund and never revisit the allocation again. While these funds are simple and hands-off, they are built for the average investor. High-income professionals with equity compensation and large brokerage accounts may need a more tailored approach.

In early career stages, heavier stock allocations may be appropriate, provided the volatility is something you can manage. More importantly, executives need to be mindful of how much exposure they already have to their company’s performance. Between salary, bonuses, RSUs, and options, it is easy to become over-concentrated.

When evaluating investment options, look closely at underlying fees. Many plans offer low-cost index funds right alongside more expensive actively managed ones. While both types of funds can serve different purposes, the difference in fees over time can quietly erode performance.

Deferred Compensation: Misunderstood and Incredibly Valuable

If your company offers a non-qualified deferred compensation plan, it is worth understanding how it works. These plans allow you to defer a portion of your salary or bonus into future years. This reduces current taxable income and allows you to time distributions in lower-income years, such as retirement.

Deferred compensation is not without risk. These funds remain tied to your employer’s balance sheet, and payouts are subject to the company’s financial health. You will also need to be strategic about how and when you take distributions, and how those payments coordinate with your other retirement income streams.

Done well, deferred compensation plans can help smooth your income and tax liability over time. They should be integrated into your broader tax, investment, and estate plan to maximize the benefit.

Stock Compensation: Payout Elections Carry Weight

Restricted Stock Units are a central part of many executive packages. When RSUs vest, the value becomes taxable as ordinary income. This happens whether the shares are sold or not, which can create surprise tax liabilities for the unprepared.

Companies usually give several payout options: take the shares, take cash, or opt for a blend. The right choice depends on your goals, liquidity needs, and existing exposure to company stock.

Too often, RSU elections are set and forgotten, only to create problems when someone retires and discovers their company’s plan does not allow share payouts post-employment. Aligning these elections with your broader financial plan can help avoid costly mistakes.

Life Insurance: Coverage Gaps Are Common

Most executives carry group life insurance through their employer, but that coverage often caps out at a multiple of salary. For high earners with families to support, mortgages to cover, or legacy goals, this may not be sufficient.

Supplemental private coverage, such as a term life policy, is usually affordable and portable. Rather than relying solely on employer coverage, consider building a plan that aligns with your full financial picture and is not reliant on your employment at your company.

Disability Insurance: The Overlooked Weak Spot

Disability insurance often gets less attention than life insurance, yet the risk of becoming unable to work due to illness or injury is greater than many realize. Group plans typically cover 40 to 60 percent of income, often excluding bonuses or equity compensation. Worse, benefits are taxable when the employer pays the premium.

Some companies offer supplemental disability coverage where the employee pays the premium with after-tax dollars. In this case, benefits received would be tax-free. This small change can significantly increase the value of the protection.

High-income professionals should also be aware of policy caps. A disability plan that replaces 40 percent of income may sound acceptable until it stops at a fifteen thousand dollar monthly benefit while income exceeds seven hundred fifty thousand annually. Make sure to check your plan’s cap. Addressing this gap early can make all the difference.

Supplemental Benefits: A Little Cushion Can Go a Long Way

Optional benefits like critical illness and hospital indemnity coverage may seem unnecessary at first glance. For the right individual, though, they can offer added financial protection during difficult moments.

Critical illness policies pay a lump sum upon diagnosis of a covered condition, which can help with deductibles, out-of-network care, or everyday expenses. Hospital indemnity policies provide cash for each day of hospital admission. These are not a substitute for health insurance, but they can soften the financial blow during a major event.

Some employers also offer legal services plans that cover basic estate planning. For those who have not updated their will or need a healthcare proxy, this benefit is worth revisiting.

Do Not Forget the Final Steps

Before wrapping up enrollment, take a few minutes to review beneficiary designations across retirement plans, insurance policies, and deferred compensation. Changes in marital status, children aging out of coverage, or the passing of a loved one are all reasons to review your elections.

Missing the open enrollment deadline locks in your choices for another year unless a qualifying life event occurs. That means whatever decisions are made now will echo through your finances for the next twelve months and potentially longer.

Open Enrollment Deserves More Than a Quick Click

For busy executives, it is easy to treat open enrollment as another checkbox. That approach may come with significant cost through missed tax opportunities, underutilized investment strategies, or unnecessary risk.

This is one of the few windows each year to realign your benefits with your broader financial goals. A thoughtful review now can save taxes later, create flexibility in retirement, and reduce stress for your family in the future.

At Strata Capital, we help high-income professionals turn complex compensation structures into coordinated strategies. Our goal is to create a higher standard of financial service so executives like you can stop guessing and start optimizing.

Disclosures & Compliance Notes

This content is provided for educational purposes only and should not be construed as investment, tax, or legal advice. All investments carry risk, and past performance is not indicative of future results. The examples provided are hypothetical and do not guarantee any specific outcome. Before making any financial decision, please consult with a licensed professional who understands your unique financial situation.

By Carmine Coppola, Co-Founder, Strata Capital

For many high-income professionals, building and protecting wealth is not just about income. It’s about strategy. That means making smart use of every financial lever available, especially the ones most people overlook.

One of the most underutilized and misunderstood financial tools is the Health Savings Account, or HSA. The name makes it sound like it’s just a place to cover doctor visits and prescriptions. In reality, when used strategically, an HSA can become a long-term, tax-efficient investment vehicle that supports your retirement goals.

Let’s take a closer look at how to transform your HSA into a 6 figure retirement account. 

Watch the full breakdown on YouTube here

The HSA’s Triple Tax Advantage

An HSA is the only investment account that delivers a triple tax benefit.

1. Contributions are tax-deductible.
2. Investments grow tax-free.
3. Withdrawals for qualified medical expenses are also tax-free.

This kind of tax treatment is rare. Traditional 401(k)s and IRAs offer tax-deferred growth, but you’ll pay taxes when you withdraw. Roth IRAs give you tax-free withdrawals, but you contribute after-tax dollars and face income limits. The HSA combines the best of both worlds. When used correctly, it may be the most efficient tool in your financial toolkit.

Where Most People Get It Wrong

Most HSA holders swipe the card the moment they get a medical bill. The money leaves the account. The opportunity for compounding disappears. The account becomes more of a spending tool than an investment vehicle.

The smarter move is to pay those medical bills out of pocket and leave the HSA invested. Let the money grow tax-free for as long as possible. When you need it later, reimburse yourself using the receipts you saved.

You can pay yourself back for qualified medical expenses any time in the future. Even if it’s 10, 20, or 30 years later. As long as you have the documentation, the IRS allows you to withdraw those funds tax-free.

In effect, your HSA becomes a tax-free reimbursement vault.

How Big Can It Get?

Let’s run the numbers.

If you’re 35 years old and contribute the maximum to a family HSA plan every year, plus take advantage of a $1,000 spousal catch-up contribution when you and your spouse reach 55, and invest that balance with a 7 percent average annual return, your HSA could grow to nearly $1 million by the time you reach age 65.

Here are the 2025 contribution limits:

• $4,300 for individuals
• $8,550 for families
• $1,000 catch-up per spouse age 55 or older

One opportunity many couples miss is the spousal catch-up after age 55. Your spouse can open a separate HSA to make their own $1,000 contribution, even if you’re already contributing the family maximum through your employer. Over time, this can add up to tens of thousands in additional tax-free growth.

The key is to treat your HSA like an investment account. Max it out, invest it wisely, and give it time to grow.

Important Note for Residents of California and New Jersey

While HSAs offer generous tax advantages at the federal level, not every state treats them the same way. In California and New Jersey, HSA earnings are taxed at the state level. These states also don’t allow a deduction for HSA contributions on your state return.

That doesn’t mean the HSA isn’t still a valuable tool. The federal tax advantages remain. However, it’s a detail you should be aware of when building your overall strategy.

What You Can Use Your HSA For Later in Life

Once you reach retirement age, your HSA becomes even more valuable. You can use it tax-free for a wide range of healthcare-related expenses, including:

• Medicare premiums (Parts B, C, and D)
• Long-term care insurance premiums
• Dental and vision care
• Hearing aids
• In-home assistance
• Medical equipment
• Prescription medications

After age 65, if you use HSA funds for non-medical expenses, there is no penalty. You’ll simply pay ordinary income tax, similar to a traditional IRA.

This flexibility makes the HSA a powerful addition to your retirement income plan. It can serve as a dedicated health fund, a source of tax-free reimbursements, and a smart cash-flow buffer in retirement.

The Smartest Way to Use Your HSA

Here’s the four-part strategy we recommend for corporate professionals:

1. Max out your HSA contributions every year.
   Treat it like you would your 401(k). Include it in your annual savings plan.
2. Invest the balance.
   Don’t let it sit in cash. Choose a long-term investment allocation that fits your goals.
3. Pay current medical expenses out of pocket.
   Keep digital records or scanned receipts. These are your future reimbursement opportunities.
4. Reimburse yourself later.
   Use those receipts in retirement or at a strategic time to withdraw funds tax-free.

This approach gives you control, tax efficiency, and long-term growth. Few other accounts offer this much flexibility.

Why This Strategy Matters

Corporate professionals face unique financial complexity. Between equity comp, deferred bonuses, rising tax exposure, and increasing healthcare costs, choosing the right savings vehicle matters.

The HSA is often overlooked. That’s a mistake. Most corporate professionals already max out their 401(k)s and often use backdoor Roth strategies. Once those options are full, the HSA becomes one of the few remaining accounts that can grow tax-free.

This is also one of the only ways to prepare for retirement healthcare costs without adding new tax burdens. Used properly, the HSA can help you protect your income today and reduce your expenses in retirement.

Is Your HSA Working for You?

There’s a difference between having an HSA and using it well. If your HSA is sitting in cash or being spent year after year, you’re not maximizing its potential.

A well-managed HSA can be one of the most effective parts of your retirement income plan. It can also reduce your taxable income and give you access to future tax-free income when you may need it most.

At Strata Capital, we specialize in helping high-level professionals look beyond the surface. Our clients don’t settle for standard advice. They expect thoughtful, proactive strategies that match the complexity of their financial lives. That includes a smarter approach to accounts like the HSA.

If you’re unsure whether your HSA strategy is aligned with your long-term goals, let’s talk.

Disclosures & Compliance Notes

This content is provided for educational purposes only and should not be construed as investment, tax, or legal advice. All investments carry risk, and past performance is not indicative of future results. The examples provided are hypothetical and do not guarantee any specific outcome. Before making any financial decision, please consult with a licensed professional who understands your unique financial situation.

By David C. D’Albero

There are few things more frustrating for high-income professionals than knowing you are paying more in taxes than necessary while feeling unsure if you are truly maximizing your benefits. You are likely well-versed in 401(k)s, IRAs, restricted stock, and perhaps even deferred compensation. You know the alphabet soup of executive finance. Yet, one of the most powerful tax-advantaged tools available today continues to fly under the radar for many professionals earning at the top of their field.

It is the Health Savings Account. The HSA.

To most, this account is simply a place to stash a few pre-tax dollars to pay for prescriptions or copays. To those in the know, it is one of the most underappreciated wealth-building tools available. When used strategically, an HSA has the potential to be your stealth retirement ally – quietly compounding in the background while remaining untouched by current taxes.

If you are a high earner looking for every edge to reduce your tax burden, grow wealth more efficiently, and build flexibility into your retirement strategy, it may be time to take a second look at the HSA.

Click here to watch the full Youtube Video

What Makes the HSA So Unique?

The HSA offers something few other accounts can match: a triple tax benefit. It allows you to deduct contributions from your taxable income, grow the funds without annual taxation, and withdraw the money tax-free when used for qualified medical expenses.

This structure is rare. Most accounts offer two tax benefits at best. The Roth IRA gives you tax-free growth and tax-free withdrawals, but no deduction on contributions. A traditional IRA gives you an upfront deduction and tax-deferred growth, but distributions are taxed as income. The HSA, however, offers all three. That combination makes it uniquely valuable, particularly for professionals in higher tax brackets.

The key is understanding how to use the account strategically – not just to pay for this year’s doctor visits, but as a long-term asset that complements your broader financial picture.

The Misstep Most Professionals Make

For many households, the HSA becomes a convenient debit card for medical expenses. Swipe, pay, move on. That is understandable. You are busy. There are already too many decisions to make in a given week. Convenience matters.

The challenge is that this short-term approach leaves significant long-term value on the table.

Instead of using HSA funds to pay for immediate out-of-pocket costs, a more strategic approach is to pay those expenses from your checking account and allow your HSA to remain untouched and invested. Doing so preserves the account’s ability to compound over decades – free from taxation, while preserving the ability to reimburse yourself for those expenses in the future.

There is no deadline to reimburse yourself for qualified expenses, provided they were incurred after the HSA was established and you have proper documentation. This means you can keep a digital folder of receipts and treat your HSA as a long-term reimbursement fund. You maintain control over when you access the funds and allow the account to grow in the meantime.

This strategy is simple to implement, highly effective, and rarely discussed.

Contribution Limits Are More Flexible Than You Think

The IRS allows fairly generous contribution limits to HSAs each year. For 2025, individuals can contribute $4,300, while families can contribute $8,550. Those age 55 or older can contribute an additional $1,000 as a catch-up contribution.

Here is a detail often overlooked. If you are on a family plan and your spouse is 55 or older, they can also contribute an extra $1,000 – but only if they open a separate HSA in their own name. This allows a household to contribute up to $10,550 annually in total, assuming both spouses are eligible.

That extra $1,000 may not seem like much on the surface. Over time, however, it creates more tax deduction space, more compounding opportunity, and more flexibility in the long run.

For those looking to fine-tune their tax strategy, details like this matter.

State Rules Can Be a Curveball

Federal tax law provides the framework for HSA advantages. Most states follow suit. However, there are a few exceptions that could catch you off guard if you are not paying attention.

For example, California and New Jersey do not conform to federal HSA rules. These states tax your HSA earnings annually, which means interest, dividends, and capital gains are subject to state income tax. Contributions to an HSA are also not deductible from state income tax in those jurisdictions.

This does not mean the HSA becomes useless in those states. The federal tax benefits still apply and often outweigh the state-level friction. However, it does mean you should be aware of the differences and account for them in your planning.

Most financial professionals will not mention this unless asked directly. It is one more reason why working with a team who understands both the nuance and the strategy is essential.

A Case for Long-Term Investment Within Your HSA

Most people think of their HSA as a savings account – and for good reason. The name suggests it. Many providers default to holding your contributions in cash.

This is fine if you plan to use the money in the short term. If your intent is to allow the HSA to grow over decades, however, cash will not get you there.

Many HSA providers offer investment options such as mutual funds or exchange-traded funds. Often, these options become available once your account balance reaches a certain threshold, typically a few thousand dollars.

Let us assume you begin investing your HSA balance and earn an average annual return of 7 percent over 30 years. If you contribute the family maximum each year and leave the funds invested, your HSA could grow to nearly $1 million. Every dollar of that growth could be accessed tax-free, provided it is used for qualified medical expenses.

This is where the HSA begins to resemble a secret retirement account – growing behind the scenes, with tax-free access available when you need it most.

Strategic Uses in Retirement

In retirement, healthcare often becomes one of the largest expenses. The HSA provides flexibility to address these costs in a tax-efficient way.

You can use HSA funds tax-free to pay for Medicare premiums, dental and vision care, long-term care services, and a wide range of qualified expenses. After age 65, even if you withdraw HSA funds for non-medical purposes, you will only owe ordinary income tax – similar to a traditional IRA – with no penalty.

This flexibility makes the HSA a useful complement to your other retirement accounts. It provides a dedicated funding source for healthcare while also giving you the option to access funds more broadly if needed.

You do not have to choose between using your HSA for healthcare or retirement. It can serve both.

A Quiet but Powerful Addition to Your Strategy

Financial planning for high-income professionals requires more than good investment returns. It requires intentional design, tax awareness, and the ability to coordinate multiple moving parts into a cohesive strategy.

The HSA is one of those parts.

It is not flashy. It is not the subject of cocktail party conversations. It is often overlooked entirely in favor of more familiar vehicles. Yet it has the potential to deliver meaningful long-term value, particularly when integrated with your broader financial picture.

At Strata Capital, our role is to help you uncover opportunities like this – not just to save you money, but to create greater clarity and confidence in how your financial life is structured.

If you are earning at a high level and navigating complex benefits, you owe it to yourself to understand the full landscape. Sometimes, the difference between a good strategy and a great one comes down to the decisions most people ignore.

This is one of them.

Start now. Max it out. Let it grow. The HSA might be your most powerful untapped resource.

Need Help Reviewing Your Investment Strategy?

At Strata Capital, we offer concierge-level financial planning designed specifically for high-income professionals. If you’re navigating stock options, deferred compensation, or just trying to cut through the noise of conflicting financial advice – we’re here to help.

Reach out for a consultation, and let’s explore a more efficient path forward.

Disclosures & Compliance Notes

This content is provided for educational purposes only and should not be construed as investment, tax, or legal advice. All investments carry risk, and past performance is not indicative of future results. The examples provided are hypothetical and do not guarantee any specific outcome. Before making any financial decision, please consult with a licensed professional who understands your unique financial situation.

By Carmine Coppola

Why High Earners Feel Stuck

If you are in your peak earning years, you know the drill. Every raise, every bonus, every stock vesting feels like a win until tax season arrives. For many executives, the frustration is real. You are working harder, achieving more, yet a significant portion of what you earn is gone before it even reaches your account.

At the same time, you probably want the peace of mind that comes with building tax free income for retirement. The Roth IRA has that appeal with tax free growth and tax free withdrawals. Then you discover that income limits shut you out of direct Roth contributions. It feels like a door slammed shut.

Here is the good news. There is a way to use your 401k to create meaningful Roth dollars without breaking the rules. It is called the mega backdoor Roth, and while the name sounds like something only accountants whisper about, the concept is surprisingly straightforward once explained.

Start with the Basics: Your Pre Tax 401k

The first step is one you may already know well. Contribute to your 401k. For 2025, you can put away up to $23,500 on a pre tax basis. If you are 50 or older, add another $7,500. If you are between 60 and 63, new legislation allows an expanded catch up of $11,250.

This is important for two reasons. One, you are saving for your future. Two, those contributions reduce your taxable income today. Many professionals stop here, thinking they have maxed out their opportunities. That is where the strategy takes an interesting turn.

The Often Overlooked Step: After Tax Contributions

Some 401k plans allow you to put in additional after tax contributions once you have hit your pre tax limit. These are different from Roth contributions. They are dollars you put in after taxes have already been paid.

Here is why this matters. The total 401k contribution limit for 2025 is $70,000. With catch ups, it can be $77,500 or more. That means that even after maxing your pre tax contributions, there is still room to put in significant additional dollars.

Many executives do not even realize this is possible. It is not a secret, but it is not something HR departments often highlight either. For those who qualify, this opens the door to a powerful next step.

Turning After Tax into Roth: The Mega Backdoor

Once you have after tax dollars in your 401k, the strategy is to move them into a Roth IRA or Roth 401k. Some plans allow this in plan, others require a rollover. Either way, this is what is known as the mega backdoor Roth.

The benefit is clear. Those after tax contributions now sit in a Roth account where growth is tax free and qualified withdrawals in retirement are also tax free. You have effectively created a large Roth balance without worrying about income restrictions while still preserving the tax deduction provided by your pretax contributions.

For high earners, this is one of the most effective ways to build tax free wealth at scale.

Why This Matters More Than Ever

Executives and professionals often feel boxed in. They want to save aggressively, but income restrictions or tax rules make it feel like there are no good options. The mega backdoor Roth changes that.

Think about the dual benefit. You reduce taxable income today through pre tax contributions, and you build a substantial Roth bucket for the future. That is flexibility. That is choice. It is one of the rare times in financial planning where you really can have both.

An Example in Action

Consider a 52 year old executive in New York. They contribute $23,500 pre tax plus $7,500 as a catch up. Their plan allows after tax contributions to reach the $70,000 annual limit. That means tens of thousands in additional savings are eligible to be rolled into a Roth account.

The result is meaningful tax savings today plus the creation of a Roth balance that can grow for decades. This is not about chasing returns. It is about understanding the rules and using them intentionally.

Important Caveats

Not every plan allows for after tax contributions or in plan Roth conversions. Some companies offer limited flexibility. Others require specific procedures. The details matter.

This is why you should always start by reviewing your plan documents. Talk with your HR or benefits team. Confirm what is allowed and what is not. It is also wise to coordinate with your CPA or tax advisor before making any moves.

Done correctly, this strategy is completely above board. Done carelessly, it could create confusion or unintended tax consequences.

Why Most People Have Never Heard of It

Despite being allowed under the rules, the mega backdoor Roth is not widely advertised. Most plan participants never hear about it. Many financial professionals do not bring it up either because it requires a bit more work and coordination.

That is a missed opportunity. When used thoughtfully, this strategy can change the way high earners approach retirement savings. It is an example of how small shifts in understanding can create outsized results.

Bringing Levity to the Complexity

I understand this can sound like alphabet soup. 401k, IRA, Roth, catch up. It is easy to feel like you need a finance degree just to navigate your own benefits. That is where I come in.

My role is to simplify. To translate this from jargon into something that makes sense. To show you the difference between what is theoretically possible and what is practical in your specific situation.

You do not need to know every line of tax law. You just need to understand enough to make smart decisions, then have someone you trust coordinate the details on your behalf.

Why This Strategy Resonates with My Clients

Most of the executives I work with are not looking for the next hot investment trend. They want peace of mind. They want to know they are not leaving money on the table. They want to feel like they are playing the same game as their peers, if not one step ahead.

The mega backdoor Roth fits that mindset. It is not about being flashy. It is about being intentional. It is about taking advantage of opportunities that others overlook.

The Bigger Picture

Retirement planning is not one dimensional. Income matters, yes. Investments matter. Taxes matter. What really matters is how all of it fits together.

The mega backdoor Roth is just one tool. It becomes powerful when combined with strategies around equity compensation, deferred income, and estate planning. The real advantage comes from integration and making sure all the moving parts are aligned.

Looking Ahead with Intention

If you are earning at a high level and feel like taxes are eating away at your progress, know that there are strategies designed for you. The mega backdoor Roth is one of the most compelling. It lets you take control, balance today’s tax relief with tomorrow’s flexibility, and create a retirement plan that reflects the complexity of your career.

This is not about doing more for the sake of doing more. It is about being intentional with the resources available to you. That is how you stop leaving money on the table and start building a plan that supports both your future lifestyle and your legacy.