Roth IRAs

[Bob Ross]

First of all, I acknowledge up front that seeking financial advice on an internet forum is quite possibly one of the more foolhardy methods of getting information. But since I have been unable to get a straightforward unequivocal answer to this (seemingly) simple question from 1) the guy who manages my 401k account, 2) the guy who manages my wife's IRA, and 3) the accountant who does our taxes -- all ostensibly professionals (and all likely to get fired as a result of this issue) -- I figured perhaps someone less vested in my personal details might be able to answer this. Or at least confirm "it's not that simple a question"

Is there a limit to the amount of money I can deposit into a Roth IRA in any given year?

(I'm talking about post-tax money, savings basically. The cash I have left over after social security and federal/state/local taxes and all other deductions yadda-yadda-yadda and then stuffed into the cookie jar.
I'm already contributing pre-tax dollars to a 401k. I have not maxed out that contribution.)

Is there a simple yes/no answer to that question? Is the amount based on how much I'm already contributing to my 401k? Are my (3) financial advisors [sic] actually doing the right thing by not giving me a straightforward unequivocal answer?

Thanks.

[Saab2000]

Yes. There is a limit. If you are under 50 the limit is $5500 per year as of 2018. If you are 50 or older you may put in an additional $1000, for a total of $6500. There are also income limitations on eligibility for contributing to a Roth IRA, but that's another topic.

The answer to your question is yes, there is a limit.

PS: The limit changes every couple years. I believe it is set by the IRS. The limit a few years ago was $5000. Now it's higher, adjusted for inflation periodically.

Also, I've found internet forums like this are actually great places to educate yourself on issues like this. I'm not looking for investing advice but financial education, which is terribly lacking in society at large.

I got religion on this about a decade ago when I realized I was closer to the end of my working days than it might have appeared and I started reading a lot of internet articles on retirement savings. They are out there by the millions. I try to ignore the ones that are heavy on 'advice' and go more for the ones that educate me on basic terminology and how the markets work and what are various retirement savings and investment options.

[sine]

Fire them all.

Saab is correct, there are limits. Check IRS website and/or new tax accountant for more details.

[Saab2000]

Another thing to be aware of is the difference between a traditional 401(k) and a Roth 401(k), which operates similarly to a Roth IRA in that it is made up of post-tax contributions. There are also limits on those annual contributions, but they are much higher at $18,500 for those under 50 and $6000 higher for those 50 and older. These limits do NOT include company matching, but there is a limit on total combined contributions to a 401(k) in a given year. This total is in excess of $50,000, excluding a Roth IRA which is a separate entity.

I have found Investopedia dot Com to be a pretty good website for basic education on these matters.

[zachateseverything]

The other thing to keep in mind is that there are further limits to contributions based on your gross income. the phase out starts at $120k/$190k modified adjusted gross income for single and married filers respectively.

https://www.rothira.com/roth-ira-limits

[dgaddis]

Fire them all.

That sounds like good advice.

[NYCfixie]

1) If he is not an accountant and/or tax attorney, I would not expect him to know.
2) If he is not an accountant and/or tax attorney, I would not expect him to know.

3) This person should know because it is based on a few factors:
- Do you have a 401k at work and do you contribute?
- Depending on answer to the above question, you may be eligible to contribute to a traditional IRA (based on many other factors)
- Based on your AGI, your filing status, if you have a 401k and if you contribute, and if you contributed to a traditional IRA, your tax professional should be able to help you make the decision.

I would ignore the advice to fire them all because that presumes your/your-wife's money manager has all the necessary information from you and an understanding of the appropriate tax law which most financial managers do not have.

If your accountant cannot answer the question, fire that person.

It is not a simple answer because it is not a simple question (you just tried to oversimplify it) but with all the necessary information any accountant should be able to answer the question for you.

First of all, I acknowledge up front that seeking financial advice on an internet forum is quite possibly one of the more foolhardy methods of getting information. But since I have been unable to get a straightforward unequivocal answer to this (seemingly) simple question from 1) the guy who manages my 401k account, 2) the guy who manages my wife's IRA, and 3) the accountant who does our taxes -- all ostensibly professionals (and all likely to get fired as a result of this issue) -- I figured perhaps someone less vested in my personal details might be able to answer this. Or at least confirm "it's not that simple a question"

Is there a limit to the amount of money I can deposit into a Roth IRA in any given year?

(I'm talking about post-tax money, savings basically. The cash I have left over after social security and federal/state/local taxes and all other deductions yadda-yadda-yadda and then stuffed into the cookie jar.
I'm already contributing pre-tax dollars to a 401k. I have not maxed out that contribution.)

Is there a simple yes/no answer to that question? Is the amount based on how much I'm already contributing to my 401k? Are my (3) financial advisors [sic] actually doing the right thing by not giving me a straightforward unequivocal answer?

Thanks.

[Saab2000]

It is actually a very simple question with just a few qualifiers. If a financial professional cannot explain this in simple terms s/he doesn’t deserve their job.

No apologies. This was a simple question with a one minute answer.

[NYCfixie]

It is actually a very simple question with just a few qualifiers....

[Saab2000]

I just wish I could get a little respect around here!

[giordana93]

It is actually a very simple question with just a few qualifiers. If a financial professional cannot explain this in simple terms s/he doesn’t deserve their job.

No apologies. This was a simple question with a one minute answer.

I'm with Saab on this one. And no offense to the genuine professionals in the money management and financial planning industry, but many of them are no more than sales people, and the products for sale are almost always in their best interest and not necessarily in the clients. Low cost index funds with an asset allocation appropriate to one's life stage and risk tolerance is where it's at. And although the following may be true--

seeking financial advice on an internet forum is quite possibly one of the more foolhardy methods of getting information

it is also true that there are some good resources. I highly recommend the Bogleheads forum, followed by the Morningstar forum(s). They are the equivalent of what we have going on here: a combination of professionals, well-informed amateurs, and a steady supply of newbies asking the same old questions until they finally do some research and get it. You can list your entire portfolio and tax bracket and have a great discussion about where priorities should be.

[davids]

I'm with Saab on this one.

Or, to put it another way: Let me Google that for you.

[defspace]

I highly recommend the Bogleheads forum

I'll give a +1 to this recommendation.
It's right up my alley. So boring it must be true.

[jlyon]

If you have extra money you want to get into a Roth you can convert a regular IRA to Roth but you will have to pay Taxes on the amount you convert.

So basically you are using the extra cash you have to pay taxes on your old 401k to then ensure that you never have to pay taxes again in the future on the new Roth IRA that used to be your normal IRA.

[jlyon]

But there some rules and limits to these conversions also. Mostly based on your current AGI.

[Saab2000]

If you have extra money you want to get into a Roth you can convert a regular IRA to Roth but you will have to pay Taxes on the amount you convert.

So basically you are using the extra cash you have to pay taxes on your old 401k to then ensure that you never have to pay taxes again in the future on the new Roth IRA that used to be your normal IRA.

Excellent points.

I have a traditional IRA and a Roth IRA. When I switched jobs a few years ago I rolled everything from my 401(k) over into these accounts, with my contribution going to a Roth IRA and the company contribution going into a traditional. I asked my brokerage firm about this conversion and the amount of money I'd have to pay in tax was not trivial in the least if I converted it all at once, definitely more than I could stomach in one payment. It is still probably worth doing but over a longer period of time with more manageable amounts annually.

But what you have said is correct and worthy of research and a chat with the broker of the OP or anyone else.

I actually find this stuff interesting and if I could go back a few decades it's possible that I would study finance instead of the things I did study in college, which have little or nothing to do with how I pay my rent and feed myself today.

[sine]

Excellent points.

I have a traditional IRA and a Roth IRA. When I switched jobs a few years ago I rolled everything from my 401(k) over into these accounts, with my contribution going to a Roth IRA and the company contribution going into a traditional. I asked my brokerage firm about this conversion and the amount of money I'd have to pay in tax was not trivial in the least if I converted it all at once, definitely more than I could stomach in one payment. It is still probably worth doing but over a longer period of time with more manageable amounts annually.

On top of that, it is generally recommended that you don't use retirement account monies to pay for those conversion taxes.

Personally, I think it's a smart move to have both traditional and Roth. It's a bit of a hedge. You never know, with changes to SS and state pension reforms coming maybe tax laws pertaining to retirement accounts will also change to lessen the pain.