Earned Income & Roth Contribution Limits
Our client, over age 50, is partially retired. He is marred filing jointly and his wife is retired. Their combined MAGI & AGI is < $240k. He has earned income of $24,000 in 2024. His employer allowed him to contribute $18,000 of the earned income to his traditional 401(k) plan. He would like to make Roth contribution of $8,000 for 2024. Is his Roth contribution limited to the remaining earned income $6,000? ($24,000- $18,000 = $6,000 reminder earned income).
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Permalink Submitted by Alan - IRA critic on Mon, 2024-08-05 13:39
His contribution is limited to Box 1 of his W-2, but Box 1 is reduced by his pre tax 401k contribution of 18,000. It is also reduced by any pre tax cafeteria plan contributions including any pre tax health insurance deductions. So his max contribution could be under 6000.
In addition MAGI for Roth contribution purposes has a phase out range between 230k and 240k. At 230k the contribution would be phased out. At 235 K the contribution limit would be cut in half to 4000.
Given these two variables that leave in question the max contribution, client may wish to wait until the final numbers are in and make the 2024 contribution prior to 4/15/2025.