Roth 401k + Roth IRA total yearly contribution limit? Forum

[Anonymous User]

I'm about to start a new job that appears to have a Roth 401k (pretty much allows contributions to the 401k on a post-tax basis and isn't taxed when withdrawn). My understanding is that the contribution limit for the Roth 401K is the same as a traditional 401k, which in 2015 is $18k. So if I contribute $18k towards that Roth 401k account can I also contribute another $5,500 towards my Roth IRA, making the total Roth retirement accounts contribution limit $23,500 each year?

Also, I'm planning to roll over $30-35k from my current employer's traditional 401k plan to my Roth IRA when I switch jobs. I already invested $5,500 towards my Roth IRA this year. So assuming I contribute the $18k towards the Roth 401k in the next 5 months, can my total Roth contributions (Roth IRA + Roth 401k) be around $55k for this year? Is that allowed under the tax code?... I can't seem to find anything that says that I can't do this, which is shocking given that the typical contribution limit is $5,500 /year towards a Roth IRA.

[legit]

Yes

http://time.com/money/3818438/roth-ira- ... hich-wins/

[Anonymous User]

Yes

http://time.com/money/3818438/roth-ira- ... hich-wins/

That link doesn't even remotely answer my question. My questions aren't whether to invest in a Roth 401k or a Roth IRA. Rather, they are (1) whether I can simultaneously contribute towards both, for a total yearly contribution of $23,500, and (2) whether I can contribute $55k towards Roth investments (Roth 401k and Roth IRA) this year when including a $30,000-35,000 401k rollover into a Roth IRA.

[Anonymous User]

Your IRA & 401(k) limits are in different buckets; so yes you may contribute to the max on both. As far as your funds that you are rolling over, that does not count towards your yearly contribution limits as long as you roll it over to a like account; roth to roth or traditional to traditional. Hope this helps.

I just noticed that you mentioned your prior employment plan was a traditional plan. You won't be able to rollover from a traditional to roth without suffering tax consquences. I would recommend calling the plan administrator at your former employer to get specific answers on this particular topic, but I know that generally you are not able to do that, because you have already received a tax benefit on your contribution to the traditional 401(k).

[legit]

Yes

http://time.com/money/3818438/roth-ira- ... hich-wins/

That link doesn't even remotely answer my question. My questions aren't whether to invest in a Roth 401k or a Roth IRA. Rather, they are (1) whether I can simultaneously contribute towards both, for a total yearly contribution of $23,500, and (2) whether I can contribute $55k towards Roth investments (Roth 401k and Roth IRA) this year when including a $30,000-35,000 401k rollover into a Roth IRA.

5th paragraph: "If you had a company match, you might save enough in the plan to receive the full match, and then stash additional money in a Roth IRA." So yes, you can simultaneously contribute towards both.

[Anonymous User]

To answer your other question, yes, you can convert a traditional 401k to a Roth IRA whenever you want and it does not count against your Roth contribution limit for the year. However, keep in mind that the full amount that you convert will be taxable income the year of the conversion, which can result in a nasty tax bill, particularly if you are in a higher bracket.

[Tiago Splitter]

Your IRA & 401(k) limits are in different buckets; so yes you may contribute to the max on both. As far as your funds that you are rolling over, that does not count towards your yearly contribution limits as long as you roll it over to a like account; roth to roth or traditional to traditional. Hope this helps.

I just noticed that you mentioned your prior employment plan was a traditional plan. You won't be able to rollover from a traditional to roth without suffering tax consquences. I would recommend calling the plan administrator at your former employer to get specific answers on this particular topic, but I know that generally you are not able to do that, because you have already received a tax benefit on your contribution to the traditional 401(k).

He can probably get the money into a pre-tax bucket in his new 401k. But most people just roll that old 401k into a traditional IRA where you have total control and go from there.

To your main question yes you can fully fund both but the Roth IRA is a little tricky if your income is too high. If your income does exceed the Roth IRA limit and you want to "backdoor" contributions into your Roth you'll want to avoid rolling your 401k into a traditional IRA.