oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
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| Roth 401k Limit?? |
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I'm retired, wife works pt. Both over 50. We put $10k into a Roth IRA each year - she makes enough W2 money for her $5k and $5k for her non-working spouse (me). Now, this year, her company offers the new Roth 401k, the limit for her is $20,500.
If she earns about $25k and she contributes $20,500 to the new Roth 401k, will we be 'double-dipping' on the W2 earnings requirement? Ie, we will have contributed $30,500 to our 2 Roth IRAs plus the $20,500 to her Roth 401k ??
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Wed Jan 10, 2007 3:34 am |
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BlankenshipFP
Money Talk Advisor
Cash: $ 79.56
Posts: 390
Joined: 05 Oct 2004
Location: Illinois
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Yes, your Roth IRA contributions are based upon your modified AGI, which is based upon your w2 income - not your gross, pre-deduction, income. So the amount of her take-home pay is (basically) what you have to work with for your Roth IRA contributions...
Jim Blankenship, CFP�, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Wed Jan 10, 2007 2:48 pm |
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efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
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The 401(k) limit applies to the total combined regular 401(k) and Roth 401(k) contributions. So she can only contribute $20,500 total to her 401(k) regardles of what portion of that is regular or Roth 401(k).
Roth IRA's are considered separately from 401(k)'s, but she would need taxable "compensation" of $10,000 in order for the two of you to max out your Roth IRA's. It is not clear if her $25k income is before or after her $20,500 401(k) contributions. But even if that is her gross income, it looks like if enough of her Roth 401(k) contribution provides at least $10k taxable work earnings, you would both still be able to max out your Roth IRA's.
A side note is that if you have an regular IRA [or 401(k) rolled into IRA] you can still make IRA to Roth IRA conversions, but not from required minimum distributions (just money over and above that). Although, I imagine that RMD could be used to pay the tax on conversions.
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Thu Jan 11, 2007 12:37 am |
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