re: Roth 401k

quote:

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If married, it’s a $196,000 income max for Roth right?

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You start to phase out of contributions to a Roth IRA there.


But you can contribute to a traditional IRA. You won’t be eligible for a deduction on that money since you’re covered by a qualified pension (your 401k).
You may contribute the maximum allowed to a traditional IRA ($6,000 for 2022 for the young crowd, and an additional $6,000 for a spousal IRA, regardless of whether they have an income- different rule than for a 401k here).
You can then take that money that you didn’t get a deduction for and do one of two things:
1) Let it grow with basis
2) convert some or all (please don’t do just some of it) into Roth


It gets screwy if you have any other account ending in “IRA” (SEP, SIMPLE, or a big traditional)- you’ll lose a fair amount of the benefit while gaining a roughly similar amount of headache if you aren’t willing/able to convert all of it and pay the associated tax bill if you have one of these other accounts.
Fun scenario: let’s say you do have $100,000 in a traditional/SEP/SIMPLE IRA that is tax deferred but you want to start making Roth contributions “through the back door” as above, but you don’t want to be subject to the pro rata rule in retirement but can’t afford taxes on $100,000 of additional income. You can:
1) apply for an EIN
2) make some income by taking online surveys, cutting your neighbors’ yard for $20, nude modeling, etc
3) file a tax return for the business
4) open a solo 401k for the business that has $10 of book income. Make sure you do it at a brokerage that allows 401k rollovers
5) roll the old tax-deferred IRA into this account
6) do the above backdoor Roth contribution strategy.




Rules are fun.