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Can I Fund a Roth IRA and Contribute to My Employer’s Retirement Plan?

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You can contribute to both a Roth IRA and an employer-sponsored retirement plan, such as a 401(k), SEP, or SIMPLE IRA, subject to income limits. However, each type of retirement account has different annual contribution limits.

For Roth and traditional IRAs, the maximum annual contribution for 2021 and 2022 is $6,000, with an additional $1,000 catch-up contribution if you’re 50 or older. If you earned less than that, the limit is your total taxable compensation for the year. You can contribute to a Roth at any age–even past full retirement age–as long as you earn taxable income. A working spouse can also contribute to a Roth IRA on behalf of a nonworking spouse.

The 401(k) annual contribution limit is $19,500 for 2021 and $20,500 in 2022, plus a $6,500 catch-up contribution if you are age 50 or older.

Key Takeaways

You can contribute to a Roth IRA and an employer-sponsored retirement plan, such as a 401(k), SEP, or SIMPLE IRA, subject to income limits.Contributing to both a Roth IRA and an employer-sponsored retirement plan can help you save as much in tax-advantaged retirement accounts as the law allows.Before funding your Roth, contribute enough to your employer’s retirement plan to take advantage of any matching contributions.Pay attention to the contribution limits allowed in each plan for your age to maximize your retirement savings.

401(k) and Roth IRA

Contributing to both a Roth IRA and an employer-sponsored retirement plan helps you save as much in tax-advantaged retirement accounts as the law allows. The tax benefits of these accounts help your nest egg grow faster and larger than possible in non-tax-advantaged accounts. The more you contribute to your retirement savings accounts each year, the earlier you’ll have the option to retire, as long as you invest wisely.

Of course, it’s impossible to know which tax bracket you’ll be in at various stages in your retirement or what the tax rates will be at that time. So, it’s not a bad idea to have some retirement funds you’ve already paid taxes on (e.g., a Roth IRA)–and some you haven’t, such as a traditional 401(k). Then you can strategize your distributions to minimize your tax liability.

If you cannot contribute the maximum allowed to an employer’s retirement plan, aim to contribute enough to max out your employer’s match.

You can also contribute to a traditional IRA even if you participate in an employer-sponsored retirement plan. However, your traditional IRA contributions may not be tax-deductible, depending on your income and whether an employer retirement plan covers you or your spouse. And, of course, your combined total contributions to Roth and traditional IRAs can’t exceed the annual limits.

Income Limits on Roth IRAs

Before funding your Roth, it’s a good idea to contribute enough to your retirement plan at work to take full advantage of any matching contribution your employer offers. It’s like getting free money, and it can help you grow your next egg faster.

Keep in mind that if your modified adjusted gross income (MAGI) reaches a certain threshold, the amount you can contribute to a Roth is reduced or eliminated. The table below shows the contribution and income limits, as well as the income phase-out ranges based on tax filing status.

2021 and 2022 Roth IRA Income Limits
Filing Status
2021 MAGI
2022 MAGI
Contribution Limit
Married filing jointly or qualifying widow(er)
Less than $198,000
Less than $204,000
$6,000 ($7,000 if you’re age 50 or older)

$198,000 to $207,999
$204,000 to $214,000
Reduced

$208,000 or more
$214,000 or more
Not eligible
Single, head of household, or married filing separately (and you didn’t live with your spouse at any time during the year)
Less than $125,000
Less than $129,000
$6,000 ($7,000 if you’re age 50 or older)

$125,000 to $139,999
$129,000 to $144,000
Reduced

$140,000 or more
$144,000 or more
Not eligible
Married filing separately (if you lived with your spouse at any time during the year)
Less than $10,000
Less than $10,000
Reduced

$10,000 or more
$10,000 or more
Not eligible
Source: IRS

Can You Contribute to a 401(k) and a Roth IRA in the Same Year?

Yes. You can contribute to both plans in the same year up to the allowable limits. However, you cannot max out both your Roth and traditional IRA accounts in the same year. The annual limit (e.g., $6,000 for 2022) is the combined total for all of your IRAs. So, for example, you could contribute $4,000 to your Roth IRA and $2,000 to a traditional IRA, reaching the maximum allowable limit of $6,000 for the year.

Do Roth IRA Contributions Count Toward Your 401(k) Limit?

No, Roth IRA contributions do not count toward your 401(k) limit. However, Roth IRA contributions do count towards your total IRA limit. So, if you contribute to both a Roth and traditional IRA, the combined amount can’t exceed the annual contribution limit.

Is There a Benefit to Having Both a 401(k) and Roth IRA?

401(k) plans have several advantages, including tax-deferred contributions and the possibility of an employer match. Because contributions use pre-tax dollars, you will pay income tax on that money in the future. Of course, if you’re in a lower tax bracket in retirement, you could come out ahead because your contributions would be tax-deductible at your current, higher rate.

A Roth IRA is made with after-tax dollars and grows tax-free. Qualified withdrawals in retirement are also tax-free. These accounts are best suited for assets that would otherwise trigger substantial taxes–for example, investments with high growth potential or stocks with hefty dividends. Thus, having both accounts gives you tax-free and taxable income during retirement, providing important tax diversification.

The Bottom Line

You can contribute to both a Roth IRA and an employer’s retirement plan, and understanding the contribution amounts and limitations can help you plan accordingly in your allocation process. Contributing diligently and accurately, particularly in meeting your employer’s matching contribution levels, may allow you to retire comfortably–or even early.

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