And What You Can Do About It

Let’s get one thing straight: a Roth IRA is an awesome retirement tool. You pay taxes on your contributions now, your money grows tax-free, and you can pull it out in retirement without paying Uncle Sam a dime.

So what’s the problem?

The Roth IRA, while powerful, has some serious limits. And if you're planning to retire comfortably—or even early—it’s probably not going to get you there on its own.

Let’s unpack how a Roth works, where it falls short, and how a lesser-known alternative can pick up the slack.

The Basics: How a Roth IRA Works

A Roth IRA lets you contribute after-tax dollars, and any growth or earnings come out 100% tax-free in retirement—as long as you follow the rules (like waiting until age 59½ and keeping the account open for 5+ years).

Pros:

Tax-free growth & withdrawals
Flexible investment options
No Required Minimum Distributions (RMDs)

Cons:

Low contribution limits
Income restrictions
No life insurance or living benefits

In 2025, the contribution limit is $7,000 (or $8,000 if you're over 50). If you're a high earner, you may not even qualify to contribute directly to a Roth.

Bottom line? It’s a great tax-free bucket—but a small one.

Why Maxing Out Your Roth Still Isn’t Enough

Even if you max out your Roth every year, it likely won’t be enough to cover the retirement lifestyle you want.

Let’s say you contribute the max for 30 years:

$7,000/year x 30 years = $210,000 contributed
Assuming 7% average growth, that becomes around $710,000 at retirement.

Not bad—but if you want to pull $60,000–$80,000 per year in tax-free income, that pot won't last long.

Also, your Roth won’t help if:

You want to retire early
You need access to funds before age 59½
You want to leave behind a tax-free legacy

This is where an Indexed Universal Life (IUL) policy starts to shine.

Enter the IUL: A Tax-Free, Flexible Wealth Strategy

An Indexed Universal Life policy is a type of permanent life insurance that builds cash value over time. That cash can be accessed tax-free during your lifetime, through policy loans.

Here’s how it works:

You fund the policy (often more than the minimum required).
The cash value grows based on the performance of a stock market index (like the S&P 500), with no risk of market loss.
Later, you access the cash for retirement income, college funding, a down payment—whatever you need—tax-free.

So Should You Ditch the Roth?

Not at all. Roth IRAs and IULs actually make a powerful one-two punch.

Use your Roth for long-term, market-based investing within limits.
Use your IUL to build an additional tax-free stream of income, add permanent life insurance, and protect yourself from market downturns.

Diversifying your tax-free income sources gives you more flexibility in retirement—and more control over your taxes.

Final Thoughts: Fill More Than Just One Bucket

If you’re only planning to retire with a Roth, you might be setting yourself up for a smaller retirement than you’re hoping for. The IUL offers a smart, flexible, and tax-advantaged way to supplement your strategy.

If you’re already maxing out your Roth or don’t qualify to contribute, let’s talk about whether an IUL could be the missing piece in your financial puzzle.