Author Topic: 401k Contribution Question  (Read 2197 times)

4fergsb

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401k Contribution Question
« on: July 28, 2014, 07:18:04 AM »
I have a quick question, which unfortunately I am not able to confirm via a google search.  I'm hoping someone with 401k knowledge far superior to mine could help put my mind to ease.  I am calculating contributions through year-end, to hit at close to the maximum $17,500.  I currently have $10,508.30 personal contributions YTD at job 1.  I also have $3,548.40 personal contributions YTD at job 2.  The job 2 figures are split, half is split in pre-tax, and half is split in a roth contribution ($1,774.20 in each, respectively.)  I met with my financial planner to open a new ROTH, and he stated that due to the fact the roth is through the employer, it actually falls under the 401k contribution umbrella of $17,500, versus the roth limit of $5,500.  Can anyone confirm this?  If this is not true, I may exceed the $5,500 limit on roth contributions.  If it is true, I need to adjust my witholdings down on the traditional contributions through year end.

dandarc

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Re: 401k Contribution Question
« Reply #1 on: July 28, 2014, 07:20:16 AM »
Sounds right - is job 2 a 401k plan?

matchewed

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Re: 401k Contribution Question
« Reply #2 on: July 28, 2014, 07:23:09 AM »
There are two separate investment vehicles we're talking about here (I think). IRA's and 401k's. They both can come in Roth or traditional. Regardless of Roth or traditional IRA's have a $5.5k total contribution limit. That limit is affected by things like whether it is a Roth or traditional and your income. Regardless of Roth or traditional 401k's have a $17.5k contribution limit. Neither contribution limit affects the other. A Roth 401k contribution doesn't affect a Roth IRA contribution.

What Roth are you opening? An IRA?

GGNoob

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Re: 401k Contribution Question
« Reply #3 on: July 28, 2014, 07:33:25 AM »
I assume you wanted to open a Roth IRA. If that's what you opened with your financial advisor, I suggest you get a new financial advisor. 401k contributions (Roth or Traditional) have nothing to do with IRA contributions (Roth or Traditional). You can contribute up to $17,500 in your 401k and $5,500 in your IRA.

4fergsb

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Re: 401k Contribution Question
« Reply #4 on: July 28, 2014, 07:35:56 AM »
I apologize, I should have been more clear.

Both employer plans are 401k vehicles.  Job 2 has the option for ROTH contributions through the 401k plan. 

Matchewed answered my question, in that my ROTH 401k contributions do NOT affect the IRA contributions.

I am opening a ROTH IRA.

4fergsb

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Re: 401k Contribution Question
« Reply #5 on: July 28, 2014, 07:37:38 AM »
In short, I was getting hung up on "ROTH" 401k contributions counting against "ROTH" IRA contributions--I'll adjust accordingly to hit the $17,500 total 401k contributions, and $5,500 ROTH IRA contributions--thanks all for the quick responses!

matchewed

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Re: 401k Contribution Question
« Reply #6 on: July 28, 2014, 07:57:11 AM »
Keep in mind that there are income contribution limits to the Roth IRA.

4fergsb

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Re: 401k Contribution Question
« Reply #7 on: July 28, 2014, 09:16:05 AM »
Keep in mind that there are income contribution limits to the Roth IRA.

Thank you for the information--fortunately I fall under the AGI requirements for a single filer.

Blake12

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Re: 401k Contribution Question
« Reply #8 on: July 28, 2014, 09:35:17 AM »
Even though there are income limits for contributing directly to a Roth IRA, there are no longer income limits for converting a Traditional IRA to a Roth IRA. So, you can contribute $5,500 to a Traditional, Non-Deductible IRA, then immediately convert to to Roth IRA. As no deduction was taken for the original contribution, and no gains have been made, there should be no tax impact of the conversion.