The Money Mustache Community
Learning, Sharing, and Teaching => Taxes => Topic started by: merula on September 16, 2017, 08:26:10 PM
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I got a mailer from Fidelity about my 401(k) today, wanting me to use their "Financial Engines" software thingy to "maximize my earnings" for the low, low price of 0.45% MER ON TOP OF the ERs of any plans they try to sell me. Uh, thanks but no thanks.
Their "reasons why you need our help" included a statement about how I should be saving more in the plan. Uhhhhh, more than $18,000? So I want to call them and say "I'd love to save more in your plan, but you've capped the combination of traditional and Roth contributions at $18k. Fix it to allow more in accordance with IRS regulations and I'm there."
Only I started digging into the IRS website, and I couldn't find anything that indicated that the $18k limit on deferrals didn't apply to Roth contributions. In fact, it specifically looks like it does:
The annual individual elective deferral limit (total of all designated Roth contributions and traditional, pre-tax elective deferrals) of $18,000 for 2016 and 2017, with an additional $6,000 if age 50 or over;
(https://www.irs.gov/publications/p560/ch04.html#en_US_2016_publink10009009)
Can anyone help point me in the right direction here?
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You are correct, the $18k elective deferral limit is across both traditional and Roth contributions. I'm sure Fidelity just sent you a mass mailing that did not take into account the fact that you're already maxing your elective deferral.
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Yep, $18k is the legal limit for direct Roth contributions to the 401(k). There's also the possibility of the so-called "mega backdoor Roth" where the plan could permit you to make after-tax traditional contributions in the amount of ($53k - $18k - any employer matching) and roll them over to Roth.