Earned income and 403B Roth plan AND Roth IRA
I have a client with a very interesting question. Is there a limit on contributing to Roth IRA IF:
• Person has taxable earned income $25,000
• They contribute to 403b Roth plan the entire $25,000 net of any taxes
• Their income is under the threshold to contribute to a Roth IRA for both themselves and their spouse another 14,000 (7000 each)
• You are allowed to max out your 403b and make a Roth or Traditional IRA contribution if AGI is under threshold and you have sufficient earned income.
Technically they would be contributing $39,000 into Roth accounts all on $25,000 of earned income – can’t seem to find where it says enough earned income to cover both 403b Roth and Roth IRA.
I assume you would need earned income to cover any and all contributions or you will be ineligible, but wanted to check with the experts!
Permalink Submitted by Alan - IRA critic on Wed, 2021-05-05 17:56
Designated Roth contributions do not reduce Box 1 W-2 income from which either TIRA or Roth IRA contributions can be made, therefore the same income can be used for two different contributions that total more than the taxable compensation.
That said, federal and state income tax withholding, SS,, but and certain other deductions such as post tax health insurance typically make it impossible to contribute 100% of earned income to a designated Roth plan, but whatever designated Roth contributions are made do not reduce remaining W-2 income from which IRA contributions can be made.