Can I open a Roth IRA account on my own and contribute 6k/year if I enrolled in my employer's Roth 401k?

Submitted by DarkHorseWizard t3_126ss28 in personalfinance

Hi, my employer offers both traditional 401k and Roth 401k. I enrolled in both of them. Now:

  1. Am I correct in assuming that the $22,500 limit for 2023 applies to these 2 accounts combined?
  2. If so, then the Roth IRA with $6k limit is a separate entity and I can open one and contribute to that on my own?

Thanks!

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nkyguy1988 t1_jean2y9 wrote

  1. Yes.

  2. IRA means individual. You can open one wherever you want. Limits here don't cross with 401k.

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kylejack t1_jeape5w wrote

Yes, but if you can afford to max a 401K and an IRA, make sure you meet the income limits for Roth IRA contributions.

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DarkHorseWizard OP t1_jeaq9tl wrote

Thank you! Yeah I will have to look into that. I already lost a year of tax savings not knowing all these info.

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kylejack t1_jearblu wrote

Okay if you end up being too high in income, you can still do it through Backdoor Roth, so read up on that if so.

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Cruian t1_jeancfb wrote

>Can I open a Roth IRA account on my own and contribute 6k/year if I enrolled in my employer's Roth 401k?

Yes, limits are separate.

>Am I correct in assuming that the $22,500 limit for 2023 applies to these 2 accounts combined?

Yes. Those 2 share the same limit.

>If so, then the Roth IRA with $6k limit is a separate entity and I can open one and contribute to that on my own?

Yes.

There are 2 splits on standard retirement accounts:

  • Account type (401K, IRA being the most common, but a few other types do exist)

  • Tax treatment (Roth vs Traditional)

The annual limits supply to the account type, not tax treatment.

>if I enrolled in my employer's Roth 401k?

Is that actually best for you?

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DarkHorseWizard OP t1_jeaoxrl wrote

Oh wow! I always thought that Roth 401k was the best since you don't have to pay any taxes once you take the money out assuming it grew substantially. Thank you for letting me know!
So a better plan would be it seems to max out the traditional 401k, and then put 6k in the Roth IRA it seems, right?

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diatho t1_jeaqgvg wrote

Run your own numbers and do a bit more research. Roth is good for some people it doesn’t always suck.

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