Author Topic: Question about Max Contributions  (Read 1542 times)

tophdna

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Question about Max Contributions
« on: October 19, 2016, 07:08:40 AM »
I'm about to be married and we both are interested in max contributing to our 401K ($18,000) and Roth IRA's (5,500). We have no debt and do not currently have a mortgage. I have a few newbie questions.

Once we are married can we both still contribute to our own 401k's and Roth's? (What I mean by this is, I know max contributions for an individual are 18k for the 401k and 5.5k for the Roth. Once we are married do those rules still apply individually? Can I max mine out and hers?) Also I was curious if I will see any of this on our taxes? Our combined annual income is slightly over 100k. I'm under the impression that as long as I don't touch any of this i shouldn't suffer any penalties. (I understand the Roth is going in post-tax and that the 401k will be taxed once it is removed after age 59.5).

If anybody could give me any insight on this it would be greatly appreciated.
« Last Edit: October 19, 2016, 07:11:46 AM by tophdna »

JustGettingStarted1980

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Re: Question about Max Contributions
« Reply #1 on: October 19, 2016, 07:12:40 AM »
Hello,

Once we are married can we both still contribute to our own 401k's and Roth's? (meaning mine and her's?)  ---> Yes, limit of $18,000 each, or 36K to the 401K, and an additional $5500 each to the Roth IRA's.

Also I was curious if I will see any of this on our taxes?  --> So take your joint married W2 Income and subtract your 401K contributions (and any other deductions). That becomes your Adjusted Gross Income, and your Federal Income Tax is based upon that number.

JGS

seattlecyclone

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Re: Question about Max Contributions
« Reply #2 on: October 19, 2016, 10:15:05 AM »
Once we are married can we both still contribute to our own 401k's and Roth's?

Yes, the limits are the same regardless of marital status. Once you're married there's even a "spousal IRA" provision that lets you max out an IRA for a non-working spouse if you ever decide to go down to one income.

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Also I was curious if I will see any of this on our taxes?

The income that you report on your taxes will be decreased by the amount of your pre-tax 401(k) contributions, which will affect your tax bill accordingly.

Being married can change your combined tax bill a bit compared to being two single individuals; how much depends on a number of factors and you'll have to run the numbers for your own situation.

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I'm under the impression that as long as I don't touch any of this i shouldn't suffer any penalties. (I understand the Roth is going in post-tax and that the 401k will be taxed once it is removed after age 59.5).

Yep, no penalties if you let the money sit until you're 60. In case you weren't aware, there are also ways to access that money penalty-free at an earlier age, documented in this thread.

MustacheAndaHalf

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Re: Question about Max Contributions
« Reply #3 on: October 19, 2016, 10:35:00 AM »
OP - You definitely have to keep separate IRAs (which stands for Individual Retirement Account), but there's a nuance you might miss so I'll mention it.  You can each contribute $5,500 to a Roth IRA provided your combined income is $11,000 or more.  But it doesn't matter which spouse earns the income - you can earn $0, your spouse $100k, and you can contribute $5,500 to a Roth IRA.  So while technically you have to use your own individual retirement account, you can rely on your spouse's earned income and can even get the money to fund that IRA from your spouse.

Jack

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Re: Question about Max Contributions
« Reply #4 on: October 19, 2016, 12:36:05 PM »
OP - You definitely have to keep separate IRAs (which stands for Individual Retirement Account), but there's a nuance you might miss so I'll mention it.  You can each contribute $5,500 to a Roth IRA provided your combined income is $11,000 or more.  But it doesn't matter which spouse earns the income - you can earn $0, your spouse $100k, and you can contribute $5,500 to a Roth IRA.  So while technically you have to use your own individual retirement account, you can rely on your spouse's earned income and can even get the money to fund that IRA from your spouse.

That doesn't apply to 401ks though, since they are tied to each spouse's employer.