A listener with $115,000 income found she had money available after reducing discretionary spending. She compared Roth IRAs with annuities and was advised to fund the Roth first, keeping the option to add an annuity later. The strategy is based on tax diversification: retirement withdrawals from different tax “buckets” provide control over future taxes. Traditional 401(k) contributions are pre-tax, so withdrawals are taxed as ordinary income. Roth IRA contributions are after-tax, and qualified withdrawals and growth are tax-free. For 2026, the Roth IRA limit is $7,000 for savers under 50, and $115,000 single income is below the phase-out range, allowing the full contribution. Contributing $7,000 annually for 25 years at a reasonable return can produce a balance in the six figures, withdrawable tax-free after age 59.
"Here is the concrete math for someone in Nicole's position. The 2026 Roth IRA contribution limit is $7,000 for savers under 50. At a single filer income of $115,000, she is below the phase-out range and can contribute the full amount. Contribute $7,000 a year into a Roth IRA for 25 years at a reasonable average annual return, and the ending balance is well into the six figures, every dollar of it withdrawable tax-free after age 59"
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