My client Dave is 63 DOB 3/29/1960. He wants to max out his 401-K for 2023 and do the maximum Roth too. He makes about $170K. His wife is retired and not working. She gets a modest pension and Social Security.
Their combined AGI for 2022 was $178,000. Last year was a banner year for the company so he expects to make a little less this year and wife will receive about the same amount. Can he do both with catch ups? What is the max he could put in each?
Her 8K Pension and Social Security is accurate because it is based on her work record. She made considerably less than her husband and she is not elibible for the spousal benefit (50% of his) until he files which will not be for a couple of years then she will get an add on benefit. In summary Roth contributions are not tied to 401-K deferrals just income- Wow glad I asked. Also the new Rule for 2024 catch up contributions for income over $145K to be considered after tax Roth -Non of my partners know that one – big help thanks
For more info on the SECURE Act 2.0, there are some nice summary sites, as this act has had a major impact on retirement plans, including IRAs. T Rowe Price has an excellent summary of these changes by the year they become effective.https://www.troweprice.com/financial-intermediary/us/en/insights/articles/2023/q1/secure-2-0-act-cheat-sheet.html
Permalink Submitted by BruceM on Thu, 2023-04-13 22:46
Your numbers don’t look right. If his salary is $170K and his wife’s Social Security + Pension brings their AGI to $178K, this would mean her annual pension + SS is $8K?Yes, his ability to contribute the max to his employer sponsored 401(k) including the catchup contribution has nothing to do with his ability to also make the maximum contribution to his Roth IRA incuding catch up, assuming he is age 50 and older. His wife can also make a max Roth IRA contribution + catchup based on his earnings. The ability to make a Roth IRA contribtion begins to phase out for 2023 when their modified AGI hits $218,000 if they are married filing jointly, but it soulds like they’ll be well below this limit. However, under SECURE 2.0 beginning in 2024, catchup contributions to employer plans must be treated as non-deductible Roth contributions for those whose wages exceeds $145,000