The Optimal Order of Investing for High-Income Earners
Pay Less. Keep More. Build Wealth.
Building Wealth Is a Sequence, Not a Guess
Most high earners invest in the wrong order—and lose thousands to taxes and missed opportunities. Here's the strategic sequence that maximizes every dollar.
Click any step to reveal the tax strategy connection
Foundation
Priority
Tax-Advantaged Growth
Wealth Acceleration
Optional
1
🏦 Emergency Savings
Priority: Liquidity
Build at least 1 month of liquid emergency savings in a savings or money market account. This is your foundation—everything else builds on top of financial stability.
2
💰 Get 401(k) Employer Match
Free Money
Contribute enough to receive your full company match (typically 4-6% of salary). This is a guaranteed 100% return—don't leave free money on the table.
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Tax Strategy Connection
P1Reasonable Compensation Analysis — For S-Corp owners, optimizing your W-2 salary affects how much you can contribute to employer-sponsored plans. The right balance between salary and distributions maximizes both retirement contributions and SE tax savings.
3
💳 Pay Off High-Interest Debt
>12% Interest
Eliminate any debt above 12% interest rate (credit cards, high-interest loans). It's nearly impossible to beat 20%+ returns through investing—paying this off IS your best investment.
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Tax Strategy Connection
P2Timing Strategies — Strategic timing of income recognition and expense acceleration can free up cash flow for debt payoff. Deferring income to next year or accelerating deductible expenses can create the liquidity you need to eliminate high-interest debt faster.
4
🎯 Max Out Roth IRA
$7,000/year ($8,000 if 50+)
Use the backdoor Roth IRA strategy for high earners. Tax-free growth and tax-free withdrawals in retirement make this one of the most powerful wealth-building tools available.
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Tax Strategy Connection
P3Backdoor Roth IRA — High earners are blocked from direct Roth contributions. The backdoor strategy (non-deductible Traditional IRA → Roth conversion) bypasses income limits. Requires careful handling of the pro-rata rule if you have existing Traditional IRA balances.
5
🏥 Fund Health Savings Account (HSA)
$4,300 single | $8,550 family
The only triple tax benefit in the tax code: deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses. Pro tip: Invest the funds—don't just save them.
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Tax Strategy Connection
P3HSA Triple Tax Advantage — Pay current medical expenses out of pocket, save receipts, and let HSA funds grow tax-free for decades. Withdraw tax-free anytime by submitting old receipts. After age 65, HSA functions like a Traditional IRA for non-medical expenses.
6
🚀 Maximize 401(k) + Mega Backdoor Roth
Up to $70,000/year
Complete your employee contributions ($23,500 in 2025), then use after-tax contributions with mega backdoor Roth conversion. This strategy can triple your tax-advantaged retirement savings.
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Tax Strategy Connection
P3Solo 401(k) — S-Corp owners can contribute as both employee and employer, potentially sheltering $70,000+ annually.
P3Mega Backdoor Roth — After-tax 401(k) contributions converted to Roth. Requires plan that allows after-tax contributions and in-service distributions or in-plan Roth conversions.
7
🎓 College Savings (Optional)
$19k–$38k/year (529)
Only after securing YOUR retirement. Options include Coverdell ($2k), 529 plans ($19k single/$38k married gift tax exclusion), or Kids Roth IRA ($7k if they have earned income). Remember: Put your oxygen mask on first.
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Tax Strategy Connection
P3Education Planning Integration — 529 contributions may qualify for state tax deductions (varies by state). Superfunding allows 5 years of gifts upfront ($95k single/$190k married) without gift tax. Kids Roth IRA contributions can come from your Hiring Kids strategy.
8
📊 Taxable Brokerage Account
Accessible Anytime
After maxing tax-advantaged accounts, invest in taxable brokerage for mid-term wealth building. More flexible than retirement accounts—accessible before age 59½ without penalties.
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Tax Strategy Connection
P4PTET Election — Pass-through entity tax elections can help recapture state tax deductions lost to SALT cap, reducing federal tax on investment income.
P4State Tax Planning — Strategic asset location between retirement and taxable accounts. Place tax-inefficient investments (bonds, REITs) in tax-advantaged accounts; tax-efficient investments (index funds) in taxable accounts.
9
🏠 Rental Property Portfolio
Cash Flow + Appreciation
Buy-and-hold rental real estate for passive income, tax benefits, and long-term appreciation. Consider converting old primary residences to rentals when you move.
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Tax Strategy Connection
P5Real Estate Professional Status — 750+ hours unlocks unlimited passive loss deductions against ordinary income.
P5Cost Segregation Study — Accelerate depreciation to generate massive paper losses in year one.
P51031 Exchange — Defer capital gains indefinitely by exchanging into like-kind property.
10
🔧 Alternative Assets
Higher Risk, Higher Reward
Private equity, private lending, small businesses, and oil & gas investments for potentially higher returns. These require more due diligence and are typically illiquid.
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Tax Strategy Connection
P6Oil & Gas Investments — Intangible drilling costs (IDCs) are often 70-80% deductible in year one, creating immediate write-offs against ordinary income.
P6Delaware Statutory Trust (DST) — Passive 1031 exchange option for those who want real estate tax benefits without active management.
P9Premium Alternative Investments — Aircraft depreciation, renewable energy tax equity, leveraged technology purchases, and family office structures for sophisticated investors seeking maximum tax efficiency.
11
🎯 Pay Off Low-Interest Debt (Optional)
<5% Interest
Only after completing all other steps. Debt below 5% is often better left in place while you invest at higher returns. The math favors investing over paying off cheap debt.
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Tax Strategy Connection
P7Exit & Wealth Transfer Planning — At this stage, focus shifts from accumulation to preservation. Strategies like QSBS exclusion, installment sales, and family LP structures become relevant as you plan for business exits and generational wealth transfer.
P8Charitable & Philanthropic — Donor Advised Funds, private foundations, and charitable remainder trusts let you give strategically while maximizing tax benefits and creating lasting legacy.
💡
Key Principle
Don't get overwhelmed. Focus on one step at a time. Start where you are and work through the sequence systematically. Each step builds the foundation for long-term wealth creation—and each step has tax implications that can save or cost you thousands.
Wealth Building + Tax Strategy = Real Results
Most advisors give you one or the other. We connect both—so you keep more of what you build.