When it comes to saving for retirement, many people wonder if they can contribute to both a 401k and a Roth IRA at the same time. The answer is yes, you can contribute to both accounts simultaneously, as long as you meet the income eligibility requirements for a Roth IRA.
A 401k is a retirement savings account that is sponsored by your employer. Contributions to a 401k are made on a pre-tax basis, meaning that the money is taken out of your paycheck before taxes are deducted. This can help lower your taxable income and potentially reduce your tax bill. The funds in a 401k account grow tax-deferred, meaning you won’t have to pay taxes on the earnings until you withdraw the money in retirement.
On the other hand, a Roth IRA is an individual retirement account that is funded with after-tax dollars. This means that contributions to a Roth IRA are made with money that has already been taxed. The advantage of a Roth IRA is that the funds grow tax-free, and qualified withdrawals in retirement are also tax-free.
The contribution limits for a 401k and a Roth IRA are separate, so you can max out contributions to both accounts in the same year if you are able to do so. For 2021, the contribution limit for a 401k is $19,500 for those under the age of 50, and $26,000 for those age 50 and older. The contribution limit for a Roth IRA is $6,000 for those under the age of 50, and $7,000 for those age 50 and older.
To contribute to a Roth IRA, you must also meet certain income eligibility requirements. For 2021, single filers must have a modified adjusted gross income (MAGI) of less than $125,000 to make a full contribution to a Roth IRA. For married couples filing jointly, the MAGI must be less than $198,000. If your income exceeds these limits, you may still be able to make a partial contribution to a Roth IRA.
In conclusion, it is possible to contribute to both a 401k and a Roth IRA at the same time, as long as you meet the income eligibility requirements for a Roth IRA. By contributing to both accounts, you can take advantage of the tax benefits of each account and maximize your retirement savings. It is always a good idea to consult with a financial advisor to determine the best retirement savings strategy for your individual situation.
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66k? I thought it was 22500k