403(b), 457, SEP IRA, Roth IRA

[bank5]

I'm eligible for the following retirement accounts:
401k, 403b, 457, Roth IRA, Sep IRA

What is the max I can contribute to each account (I'm under 50)? My understanding is:
401k + 403b -- $16.5k/yr
457 - $16.5k/yr
Roth - $5k/yr
Sep IRA - ~20% of my net SE income

Is that correct? Is there a website that lists the maximum contribution amounts for all of ones retirement accounts

[Gumby]

Try looking here.

Reference Room

[Sarah in SC]

Lucky so-and-so. We read about you people in our CFP courses. Watch the income upper limits on that Roth. Nice going though, bank5!

[bank5]

Quote:

Originally Posted by Gumby Try looking here. Reference Room

Thanks for the link. What I'm specifically looking for is a website that lists accounts that are (for lack of a better term) "mutually exclusive". For example, I'd consider a traditional IRA and Roth IRA mutually exclusive because one can contribute $5k to one or the other but not $5k to each one.

[bank5]

Quote:

Originally Posted by Sarah in SC Lucky so-and-so. We read about you people in our CFP courses. Watch the income upper limits on that Roth. Nice going though, bank5!

Well, I haven't been able to max them all out yet, but I'm hoping to at some point My wife and I are fortunate to have 2 1/2 pretty good jobs so we're trying to sock a lot away early, especially if kids are in our future.

[ERD50]

Quote:

Originally Posted by Sarah in SC Lucky so-and-so. We read about you people in our CFP courses. Watch the income upper limits on that Roth. Nice going though, bank5!

Have you come across this little twist on the limits?

The question is, does money earned and deposited in a 403b also count as "earned income" for Roth IRA contributions for both earner and spouse? Example:

Say the wage earner makes $20,000 in a year, and contributes $16.5k to a 403b. This is the only earned income between wage earner and spouse. Can both the wage earner and spouse also make a $5,000 Roth IRA contribution (10K total) in that year?

TaxAct didn't complain, you need $10,000 of earned income to make a combined $10K Roth IRA contribution, and the earned income on a W2 supports that. But it seems a bit odd to me that a total of $26.5K was contributed, with only $20,000 of earned income ( the Roth IRA money obviously came out of our portfolio).

The 403b is a Roth 403b, if that makes a difference (I don't think so).


TIA for any light you can shine on this, it bugs me. It's clearly an uncommon circumstance, but not really convoluted - I already have a lot of Trad IRA $, I want to (tax) diversify as much as I can into Roths (including Trad>Roth conversions when they make sense), so I'm just trying to max things out. When I've asked here before, I think Martha suggested I ask for an "IRS ruling" on it. I guess, but it just seems odd to me that a taxpayer, acting within what appears to be the allowed rules would need anymore clarification than what is in the instruction sheet.

-ERD50

edit - bank5's "mutually exclusive" term fits well (saw it after I posted)

[Sarah in SC]

Let me work on this, guys. I think I have a person who can help with this that is an actuary. I see exactly what you are asking, I just don't know about how it counts as earned income.

The ones that are exclusive to each other are the 401k and the 403b. The 457 can be added to either one. The Roth and Trad total contributions can't be more than the total for one (ie, $5000), but you could put, say, half into the Roth and half into the traditional, as long as you were within the Roth limits.

The SEP is really where I have a question, though, as it isn't one that I fool with very often.

And yes, it is fairly rare to have an employment situation that offers all of these differing plans to the same individual. It is a favorite of the CFP board to ask about, but not very likely in "real life".

[eridanus]

The 401k + SEP have a combined limit of $49,000. That includes the $16,500 and 20/25% of SE income.

[Martha]

I suggest reading publication 560, it helps a lot in determining your maximum contributions. Publication 560 (2008), Retirement Plans for Small Business

As Sarah says, the Roth and traditional IRA contributions have to be coordinated--there is one total maximum. She also mentioned that the 457 plan does not effect the amount you may contribute to other plans. The sticklers are the 403b, 401k and SEP IRA.

The following article describes in plain English how to calculate retirement contributions when you have more than one employer or are self employed and employed: Common Questions About Retirement Plans

You can make salary-deferral contributions of up to $16,500 plus an additional catch-up amount of $5500 if you reach age 50 by Dec 31, 2009. This amount can be split among multiple retirement plans in which you participate, provided your aggregate salary-deferral contributions to all the plans do not exceed $16500 plus catch-up. Employer contributions are not counted towards these limits and the employers do not have to coordinate their contributions.

The SEP IRA will have a 20 or 25% maximum. If you end up contributing $16,500 to a 401k at work, to calculate your SEP I believe that you will have to take into account this contribution. Say you are eligible to contribute the maximum of $49,000 to the SEP. You must deduct the 16,500 you contributed to the 401k so your max under the SEP would be $32,500. The nice thing is that you do not have to deduct what your employers contributed to the 401k and 403b. EDIT: I retract what I said about the SEP limits.

This does get complicated so read publication 560. And read my signature.

[bank5]

Thanks all for the help. That helps clarify things a bit. My SEP contribution will only be a couple thousand so I won't have to worry about reaching the $49k limit for my 403b + SEP.

[heyduke]

bank5 unless you go over 16.5 k I think you will be okay ... others here will point out if I am wrong so take it with a grain of salt...

[DblDoc]

+1 to what Martha and eridanus stated. I have a 403b, 401a, SEP IRA and traditional IRA. My employer contributes to the 401a, I contribute to the 403b and have self employment income that goes to the SEP IRA and must stay below the $49k limit.

DD

[LOL!]

bank5 has been asking the same question since he joined the forum many moons ago.

Your employee contribution of $16,500 to 401(k)+403(b)+SEP-IRA is mutually exclusive in the same way that your $5,000 contribution to traditional+Roth IRAS is mutually exclusive.

Your employer contribution to your 401(k)+403(b)+SEP-IRA is not mutually exclusive. Apparently your employer's contribution to your SEP-IRA is now limited by your income.

Questions: Is the employer-contribution limit to the SEP-IRA actually $49,000 - $16,500? Or is the employer contribution limit $49,000 when the employee contributes $0?

Note: we understand who the employer is for a self-employed person.

The $16,500 to the 457 is all by itself.

[Martha]

Quote:

Originally Posted by LOL! bank5 has been asking the same question since he joined the forum many moons ago.

I thought it sounded familiar.

Quote:

Your employee contribution of $16,500 to 401(k)+403(b)+SEP-IRA is mutually exclusive in the same way that your $5,000 contribution to traditional+Roth IRAS is mutually exclusive.

We agree.

Quote:

Your employer contribution to your 401(k)+403(b)+SEP-IRA is not mutually exclusive. Apparently your employer's contribution to your SEP-IRA is now limited by your income. Questions: Is the employer-contribution limit to the SEP-IRA actually $49,000 - $16,500? Or is the employer contribution limit $49,000 when the employee contributes $0? Note: we understand who the employer is for a self-employed person.

Are you asking about whether you could have a situation where your employer contributes to a SEP and you do not so you don't have to reduce the contribution by your 401k or 403b contributions? And does this apply if you are your own employer? My understanding is that if you are self employed you must coordinate the SEP contribution with your employee deferral 401k contributions and reduce it accordingly. EDIT: I am changing my position on this because the SEP is entirely employer contribution even if you are the employer. As I figured out later, the SEP is limited by any and all 403b contributions but you could have a 401k through a job and still contribute the max to a SEP.

Quote:

The $16,500 to the 457 is all by itself.

We agree.

[LOL!]

Here's the scenario:

Suppose I am employed by a university/government hospital. I contribute from my salary $16,500 to the 403(b) and $16,500 to the 457. In addition to this income, I have a side business that makes $300K a year. I am the sole employee. Can I put $49K into my SEP-IRA or am I limited to putting only $32.5K into my SEP-IRA?

[target2019]

Quote:

Originally Posted by eridanus The 401k + SEP have a combined limit of $49,000. That includes the $16,500 and 20/25% of SE income.

To clarify, that is 20% of SE profit, not your business income.

[target2019]

Quote:

Originally Posted by LOL! Here's the scenario: Suppose I am employed by a university/government hospital. I contribute from my salary $16,500 to the 403(b) and $16,500 to the 457. In addition to this income, I have a side business that makes $300K a year. I am the sole employee. Can I put $49K into my SEP-IRA or am I limited to putting only $32.5K into my SEP-IRA?

Post the salary, and I'll run this through Intuit Proseries.

[LOL!]

target2019,

Since the hypothetical does not apply to me, I will make up a salary.
Suppose at work I make $85,000 and my side job is a pure consulting activity where I go to a customer site, look at their business plan and say, "Yes, it's a good plan" and charge them $300,000 plus my travel expenses of $1000. I submit the travel expense receipt to them and get a check for $301,000 and a 1099MISC for $300,000.

[target2019]

Quote:

Originally Posted by LOL! target2019, Since the hypothetical does not apply to me, I will make up a salary. Suppose at work I make $85,000 and my side job is a pure consulting activity where I go to a customer site, look at their business plan and say, "Yes, it's a good plan" and charge them $300,000 plus my travel expenses of $1000. I submit the travel expense receipt to them and get a check for $301,000 and a 1099MISC for $300,000.

Just did more research to confirm the following (also seen on the computer form): The 401(k) is not related to the SEP-IRA question, unless the employers have a business connection. All 2008 limits are used here.

The maximum 2008 SEP-IRA contribution is $46K, computed from a max cap of 230,000. The max 2009 number is $49K, computed from 245,000 cap.

If you put your email in a private message to me, I will email a pdf of the worksheet.

[Martha]

I have thought about the SEP IRA issue and the section 402g limits on voluntary contributions to the 401k and 403b. I think publication 560 is muddy and I am changing my mind but I am not absolutely sure. As LOL said, the SEP is entirely employer contribution, even if you are both the employee and employer. Essentially, it is profit sharing. Because that is the case a person who has both a 401k and a SEP as a self employed person should not have to deduct the 16,500 max employee contribution from the SEP contribution and should be able to do the maximum.

But I am not comfortable with my answer without reading the regs. Target, do you have a source for your position? I do agree that the answer is different if they are related business entities.