Author Topic: New to maxing out--checking my understanding  (Read 2196 times)

AMandM

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New to maxing out--checking my understanding
« on: February 09, 2017, 01:13:02 PM »
For many years we had a small enough income and a large enough family that our taxable income was near zero, so we didn't pay attention to tax-deferred savings/investments.  But now our kids and our income are growing up, so I've been reading up on this site and others.  Before I open any accounts I want to make sure I understand. If you could you confirm or correct me as needed, I'd really appreciate it!

Situation: Married filing jointly. Husband has a job with tax-deferred retirement plan; employer contributes 5% and matches employee contributions up to another 5%.  I am home but make a few hundred dollars a year in freelance work.

My understanding is:
1) We can deduct up to $18,000 of employee contributions to his retirement plan.
2) We can also deduct up to $6500 contributed to a tIRA for each of us (we're both over 50), as long as our joint earned income is at least  $31k (18000 + 6500 + 6500).  It doesn't matter if his is, say, $30k and mine is $1k.

Lucky Recardito

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Re: New to maxing out--checking my understanding
« Reply #1 on: February 09, 2017, 01:44:01 PM »
We can deduct up to $18,000 of employee contributions to his retirement plan.

More! Since your husband is over 50, he can contribute up to $24k pre-tax.

AMandM

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Re: New to maxing out--checking my understanding
« Reply #2 on: February 10, 2017, 12:24:02 PM »
Wow, $24k!  I doubt we could save that much as well as fund IRAs.  On the other hand, increasing the retirement witholding would be easier than opening an IRA, especially for my decision-averse husband.  So maybe we'll start there.  Thanks!

RangerOne

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Re: New to maxing out--checking my understanding
« Reply #3 on: February 10, 2017, 12:44:07 PM »
Your Husband has an extremely generous employer match. If I understand he gets a base 5%. Plus another 5% for a total of 10% from the employer based on his contribution meeting a certain level?

That is a really good deal if I am understanding you correctly.

BlueLesPaul

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Re: New to maxing out--checking my understanding
« Reply #4 on: February 10, 2017, 01:14:42 PM »
I am sure you are aware of this, but just in case, please note you need to be aware of the Trad IRA phase-out limits.  In 2017, if your MAGI is less than $99,000, you don't need to worry about them, but if it is over that threshold, you may not be able to contribute to your husband IRA and get the full deduction.

I concur that if you get a 10% match, that is amazing!  Wish I got that!

AMandM

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Re: New to maxing out--checking my understanding
« Reply #5 on: February 13, 2017, 10:12:06 AM »
Your Husband has an extremely generous employer match. If I understand he gets a base 5%. Plus another 5% for a total of 10% from the employer based on his contribution meeting a certain level?

That is a really good deal if I am understanding you correctly.

Yes, you're understanding it right. It is great.  He gets 5% no matter what, and they match his contributions up to another 5%.  We've been saving this extra 10%, along with our 5% contribution, since he started 18 years ago.

AMandM

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Re: New to maxing out--checking my understanding
« Reply #6 on: February 13, 2017, 10:19:56 AM »
Thanks, BlueLesPaul.  I was not aware of that, but we don't have to worry about it ;-)

 

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