Scenario: I am putting annually 19k in my 401k with no match from my company side. However I would like to put additional 6k in IRA or Roth IRA as well for increasing my tax benefits but when I checked with my company they said I can do max 19k in ira and 401k combined. Is this true? A quick search online is showing that I can invest 6k in IRA/Roth-IRA + 19k in 401k and ask tax consultant to include it in my tax filing, is that correct? Fidelity my online 401k account pretty much allows to put 6k in my IRA by myself in addition to my 401k amount. Please advise. TC: 128k yoe: 14 #401k #IRA #RothIRA
Google “back door Roth IRA”
Not relevant to this post at ALL
It is if they are contributing to an ira in addition to the 401k, which is a waste unless it is a Roth. Double taxation
There's a limit on deductions, so you'll most likely run into issues if you contribute to a traditional 401k and traditional IRA. However if you contribute to a traditional 401k and a backdoor Roth IRA or normal Roth IRA it is fine. https://www.fool.com/retirement/2017/07/15/can-i-contribute-to-an-ira-if-i-have-a-401k-at-wor.aspx
Your ability to make tax deductible contribution to a traditional IRA outside your 401k is limited by your Modified Adjusted Gross Income (MAGI). At 128K it doesn’t look like you can add money into traditional IRA without paying taxes for it. You can add money, it’s just taxed (not tax deductible), which is foolish because you get taxed again when you withdraw it. However, the MAGI for Roth IRA is much higher. If you’re married filing jointly, you can put in 6K if you and your partner earn under 196K. For single persons the lower limit is 124K, but you can make partial contribution up to 139K. https://www.schwab.com/ira/roth-ira/contribution-limits
Thought you can deduct your 401k contributions before calculating AGI. If so your MAGI is low enough to do full Roth directly. otherwise --- you should do backdoor Roth.
I looked it up and it seems easier to backdoor than worry about the numbers. Contribute after tax dollars to a non deductible IRA. If you invest it, any gains are subject to tax. Before the calendar year ends, roll it over to a Roth IRA. I’m not sure if you can just have 2 accounts (Ira and Roth) and transfer the funds annually , or if you have to open a new Ira every year, convert it to Roth, and then roll the new Roth into an existing one. Maybe someone else can shed light on this part.
If you have enrolled in a 401k program, you are not allowed to contribute to IRA or Roth IRA. You can however contribute to non-deductible IRA.
Ok, non-deductible IRA is Roth RA I belive
Not true. You can contribute to either but it's not deductible for regular IRA or Roth IRA (subject to income limits).