Roth and 401k Tax Implications Question | TigerDroppings.com

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Lsut81
USA Fan
Member since Jun 2005
65100 posts

Roth and 401k Tax Implications Question



Was speaking with an administrator today about a newly set up 401k that our company is implementing.

Are there any limitations on contributions regarding the combo of the two? I've never seen anything that ties those two in together, but the way the rep worded things there was. I asked for clarification and he said he couldn't give me info on it, that I had to talk to a CPA

I know there's a $5500 limit on Roth/IRA combos, but does that tie into the 17500 max on a 401k?

TIA







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Ace Midnight
LSU Fan
Currently asymptomatic
Member since Dec 2006
32361 posts

re: Roth and 401k Tax Implications Question


quote:

know there's a $5500 limit on Roth/IRA combos, but does that tie into the 17500 max on a 401k?


If you're pure ROTH on your IRA, one shouldn't affect the eligibility of the other. The only implication for your 401K would be if you had your own, tax-deferred IRA - there is some overall cap on that.

But, if you qualify for ROTH, the 2 are completely separate and unrelated.






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GoCrazyAuburn
Auburn Fan
Member since Feb 2010
15343 posts

re: Roth and 401k Tax Implications Question


quote:

if you qualify for ROTH, the 2 are completely separate and unrelated.






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Lsut81
USA Fan
Member since Jun 2005
65100 posts

re: Roth and 401k Tax Implications Question


quote:

But, if you qualify for ROTH, the 2 are completely separate and unrelated.



Thats what I thought... F that guy

I can max out my Roth IRA of 5500 and still go into a 401k for 17500.

I just can't do both a Roth/Traditional IRA for more than 5500.






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Ace Midnight
LSU Fan
Currently asymptomatic
Member since Dec 2006
32361 posts

re: Roth and 401k Tax Implications Question


quote:

I just can't do both a Roth/Traditional IRA for more than 5500.


Well, I think you will hit certain caps on what can be tax-deferred (and there are complicated charts) - but, as you say, you should be able to go full bore $5500 on Roth (and you should be able to do that for your spouse, if you're married), PLUS take the full advantage of $17,500 401K at work, until age 50, and you can do a catch up of $5,500 - again, subject to income bracket phase outs.

But, as ROTH is not tax deferred, it is subject to the limits on an IRA, rather than any cap on tax deferred retirement savings.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
30339 posts

re: Roth and 401k Tax Implications Question


quote:

The only implication for your 401K would be if you had your own, tax-deferred IRA - there is some overall cap on that.


Not really.

Under normal circumstances, your limit on the IRA (whether it is a Roth or a Traditional) is unaffected by the limit on the 401(k). There's no problem maxing both, in fact I do that myself. But ...

The amount you can contribute to your 401(k) and *deduct* from your taxes can be impacted in certain situations. For example, if you are married and your spouse has a 401(k) or some other employer pension plan. On the flip side, if you contribute to your 401(k) that reduces your AGI, which can matter if you are over the limit at which you can contribute the full IRA amount.

So there can be some tricks in play here and if you might qualify you really need to just read IRS pubs 560 and 590. But normally this doesn't apply (especially if you are single) and you can max both.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
30339 posts

re: Roth and 401k Tax Implications Question


quote:

you should be able to go full bore $5500 on Roth (and you should be able to do that for your spouse, if you're married), PLUS take the full advantage of $17,500 401K at work


Read IRS Pub 590, which specifically addresses cases where your spouse is covered by a 401. You might be able to toss in $5500 but not the full amount for a married couple, which is greater.






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