Can my son contribute 401K in full, and a Roth IRA?

[fh2000]

My son earns $80K as software engineer. Each year, I gave my child money for them to contribute to their Roth IRA. This is the first year that my son earns salary out of college. To be fair with all kids, I still plan to give him $6000 to contribute.

My question is the income limit. In his case, he is putting the full $19,000 in his company 401K. Can he still contribute an Roth IRA this year?

From the below article, seems like he is not eligible for another Roth IRA or TIRA. Am I correct?


https://www.personalcapital.com/blog/retirement-planning/can-contribute-401k-ira/
"IRA Deduction Limits
If you save with both a 401k and a traditional IRA, you may also face some limits on your ability to deduct your contributions depending on your income. Contributions to a Roth are never deductible.
For instance, if you are covered by a retirement plan at work:
• You can deduct up to the contribution limit, if you’re single and your modified AGI is $64,000 or less for 2019. This is up from $63,000 in 2018. You can take a partial deduction if your income is between $64,000 and $74,000 in 2019 (between $63,000 and $73,000 in 2018). There’s no deduction for people who earn more than $74,000 in 2019 ($73,000 in 2018).
"

 

[Al18]

I don't think he can contribute directly to a Roth IRA this year.


He could open up a regular brokerage account and deposit the money there. Wait for the stock market dip before buying.

 

[pb4uski]

Yes, he can still contribute to a Roth.... up to $6,000 in 2019.

If you’ve already reached your 401(k) contributions limit for the year—or soon will—that’s a problem. You can't afford to fall behind in the funding-retirement game. ...

... You might still be able to contribute to a Roth IRA. However, your contribution will not be tax-deductible. On the upside, when you start taking distributions at retirement, all the money contributed after-tax will be tax-free on the back-end. However, for tax year 2020, singles making $139,000 or more (and married people filing jointly making $206,000+) can't contribute to a Roth; the ability to do so starts to phase out at $124,000 for singles and $196,000 for married filing jointly. ...

https://www.investopedia.com/articles/personal-finance/070615/i-maxed-out-my-401k-now-what.asp

... If you file taxes as a single person, your Modified Adjusted Gross Income (MAGI) must be under $135,000 for tax year 2018 and $137,000 for tax year 2019 to contribute to a Roth IRA. ...

https://www.schwab.com/ira/roth-ira/contribution-limits

 

[fh2000]

Yes, he can still contribute to a Roth.... up to $6,000 in 2019.

Thanks, PB.

The investopedia article spells out clearly that he can. I see now that Roth IRA been non-deductible has higher income limit than TIRA.

"the ability to do so starts to phase out at $124,000 for singles and $196,000 for married filing jointly. ...for tax year 2020, singles making $139,000 or more (and married people filing jointly making $206,000+) can't contribute to a Roth;"

 

[Sunset]

OP - This will be a good thing in the end, I wish I had a larger ROTH, instead of IRA, so it's good your child will have both ROTH and 401K.

 

[target2019]

Always start withe IRS link(s).
https://www.irs.gov/retirement-plan...yee/retirement-topics-ira-contribution-limits
Then click on the 2019 or 2020 link.
Yes, he can.

 

[pb4uski]

^^^^ good link

 

[armor99]

My son earns $80K as software engineer. Each year, I gave my child money for them to contribute to their Roth IRA. This is the first year that my son earns salary out of college. To be fair with all kids, I still plan to give him $6000 to contribute.



My question is the income limit. In his case, he is putting the full $19,000 in his company 401K. Can he still contribute an Roth IRA this year?



From the below article, seems like he is not eligible for another Roth IRA or TIRA. Am I correct?





https://www.personalcapital.com/blog/retirement-planning/can-contribute-401k-ira/

"IRA Deduction Limits

If you save with both a 401k and a traditional IRA, you may also face some limits on your ability to deduct your contributions depending on your income. Contributions to a Roth are never deductible.

For instance, if you are covered by a retirement plan at work:

•You can deduct up to the contribution limit, if you’re single and your modified AGI is $64,000 or less for 2019. This is up from $63,000 in 2018. You can take a partial deduction if your income is between $64,000 and $74,000 in 2019 (between $63,000 and $73,000 in 2018). There’s no deduction for people who earn more than $74,000 in 2019 ($73,000 in 2018).

"

Nothing wrong with anything I can see here. But 25% into retirement just out of school seems pretty steep?
Would that excess money not be better spent saving for the down payment of a home or paying off student loans, if there are any?

 

[kaneohe]

Nothing wrong with anything I can see here. But 25% into retirement just out of school seems pretty steep?
Would that excess money not be better spent saving for the down payment of a home or paying off student loans, if there are any?

You can withdraw Roth contributions at any time w/o penalty so why not.....

 

[kjpliny]

Keep in mind contribution limits are based on AGI, so if you take out the 401k contributions of $19k, this would bring his $80k income down to near $60k.