Author Topic: 401k & IRA limits  (Read 419 times)

boyerbt

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401k & IRA limits
« on: January 14, 2019, 09:11:49 AM »
I have tried to do some research to find an answer but cannot find anything that states this plainly - is/are there income limit(s) that restrict the amount of money that a person or couple can invest in a 401k and IRAs?

I was discussing this with my Dad and he said that depending on how taxes are filed there can limit where a person cannot max both options out annually, such as $25,000 for 2019. Is this correct?

slappy

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Re: 401k & IRA limits
« Reply #1 on: January 14, 2019, 09:14:06 AM »

TheHardenedInvestor

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Re: 401k & IRA limits
« Reply #2 on: January 14, 2019, 09:25:32 AM »
A Roth IRA has an income limit. A 401k and an IRA do not have income limits to allow contributions. Max away. Filing jointly doesn’t matter.

boyerbt

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Re: 401k & IRA limits
« Reply #3 on: January 14, 2019, 09:30:13 AM »

35andFI

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Re: 401k & IRA limits
« Reply #4 on: January 14, 2019, 09:38:39 AM »
is/are there income limit(s) that restrict the amount of money that a person or couple can invest in a 401k and IRAs?

There are no income limits for being able to contribute to a 401k.
There are income limits for tax deductible contributions to a traditional IRA if you or your spouse are offered a 401k.
There are no income limits for non-deductible contributions to a traditional IRA.
There are income limits for direct contributions to a Roth IRA.

Quote
I was discussing this with my Dad and he said that depending on how taxes are filed there can limit where a person cannot max both options out annually, such as $25,000 for 2019. Is this correct?

It's based on your income and whether or not you or your spouse are offered a retirement plan at work (for a traditional IRA).
That being said, the max contributions will be twice as large if you are married filing jointly compared to single.

I assume that you got the $25,000 from $19,000 (401k) plus $6,000 (IRA) and that you are single.


You can max the 401k.

If your MAGI is < $122,000, you can max a Roth IRA. There is a phase out between a MAGI of 122 and 137.
https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2019

If your MAGI is ≤ $64,000, you can contribute up to the max to a traditional IRA and take the full deduction. There is a phase out between a MAGI of 64 and 74.
https://www.irs.gov/retirement-plans/2019-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work

Note that you can contribute to one or both types of IRA's up to the max ($6,000 total for 2019).
So if your income allows, you can contribute up to $25,000 between the 401k and IRA for 2019.
« Last Edit: January 14, 2019, 09:41:06 AM by 35andFI »

boyerbt

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Re: 401k & IRA limits
« Reply #5 on: January 14, 2019, 10:56:13 AM »
Thanks 35andFI

For 2019 I am estimating my MAGI to be $78k so I can max both options.

35andFI

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Re: 401k & IRA limits
« Reply #6 on: January 14, 2019, 11:35:05 AM »
You're welcome. Happy to help!

With a MAGI of $78,000, you can max your 401k and a Roth IRA.

Also, if your workplace offers a HSA (Health Savings Account) I highly recommend maxing that after getting the full 401k company match.
Keep in mind that contributions to traditional retirement accounts (and HSAs) will lower your MAGI.

Investment order:
https://forum.mrmoneymustache.com/investor-alley/investment-order/
« Last Edit: January 14, 2019, 11:42:05 AM by 35andFI »