Account | LTCG Tax Rate | Qualified Dividend Tax Rate |
Roth IRA | 0% | 0% |
Taxable investment | 0% | 0% |
Thanks everyone! That clears up my questions.The $17,500 limit (for people under 50) is for your own personal contributions to a pre-tax 401(k) or to a Roth 401(k). The $52,000 limit includes employer matches. It also includes after-tax contributions by the employee to a regular 401(k) if the plan permits these contributions (approximately half do). After-tax contributions can be advantageous if your employer allows for in-service rollover of these after-tax contributions to an IRA. Then, you could convert that IRA to a Roth IRA, which has the effect of letting you contribute waaay more than the annual $5,500 limit.
But there is one issue here: I see 401k/Roth 401k contributions to be maxed at 17500 but the total you can do is 52000 for 2014. If all that the government wants is to limit savings in tax advantaged accounts, why have two limits? Why not have just one limit (either 17500 for all (with catchups allowed over a certain age) or 52000 for all)? Why give this loophole?
We got some real conspiracy theorists around here.
It's just like some of the more sane sounding posters in this thread have already stated. You need to have some taxable income so the government can collect enough money to function. Don't need the government, you say? Say goodbye to your social programs, roads, police, fire, and hundreds of other services you rely on every day.
Tax advantaged retirement accounts are designed to help people to save enough for retirement that they can survive it, not use loopholes in 401k/IRA tax laws to create tens of thousands of dollars of tax free income every year (which is encouraged enough around here as-is).
I would suggest reading this page from the IRS about the actual limits.Thanks, I didn't know that! So far that limit hasn't been a problem for me :-)
http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---401%28k%29-and-Profit-Sharing-Plan-Contribution-Limits
Salary about 260,000 USD in 2014 is not eligible for 401k employer matching contributions.