Foreign Earned Income Exclusion & Roth 403b contributions
Is allow able for a US citizen employee who is working abroad for a US employer and who qualifies for the foreign earned income exclusion to participate in the employer’s ERISA 403b plan with her contributions from salary going into the Roth option within the plan?
I know that Roth IRA contributions don’t work with excluded income but it appears that Roth 403b and Roth 401k contributions may not be restricted.
Permalink Submitted by Alan - IRA critic on Fri, 2015-12-04 03:20
Yes, income that is excluded under the FEIE can be used for qualified plan contributions. Unless the income is much higher than the exclusion, the designated Roth option would be superior to pre tax contributions since the FEIE will reduce taxable income.