Thread: IRA Limits for Married Couple?

Max contribution limits for all TRADITIONAL and ROTH IRA's (combined) for a married couple even when one is not working is $5,500 x 2 or $6,500 x2 if 50 or over. However, ROTH contribution may be limited further based on your income.

Max contribution for employer sponsored retirement accounts (combined) such as 401K, 403b and or TSP type retirement account is $18,000 plus an additional catch-up limit of $6000 of you are 50 or older. I don't think married couple rules apply here since this is employer sponsored and your spouse is not employed.....but someone else on this board can verify this part.

For some reason I missed all the previous posts so please excuse me if my answer duplicates any previous answers...

Originally Posted by jpcavin

Max contribution limits for all TRADITIONAL and ROTH IRA's (combined) for a married couple even when one is not working is $5,500 x 2 or $6,500 x2 if 50 or over. However, ROTH contribution may be limited further based on your income.

Max contribution for employer sponsored retirement accounts (combined) such as 401K, 403b and or TSP type retirement account is $18,000 plus an additional catch-up limit of $6000 of you are 50 or older. I don't think married couple rules apply here since this is employer sponsored and your spouse is not employed.....but someone else on this board can verify this part.

Thanks for your reply. I just read through 62 pages of IRS Publication 590 & could not find the answer.

I did find this from someone asking USAA a question almost 3 years ago :

"Can I contribute to Traditional TSP and Roth IRA? What are the defered limits? (I've read $17,000 for Tradtional and Roth TSP).

Given the above, can I combine Traditional TSP at $17,000 a year and also open a ROTH IRA at $5,000 a year? I haven't seen max derefered contributions for Tradition TSP and ROTH IRA."
Asked 2 years, 7 months ago

-------------------------------------

ANSWER:


"Good news!

Yes – as long as you are eligible to make Roth IRA contributions based on your income and tax filing status – you can max out your TSP contribution and max out your Roth IRA contribution in the same year."

"The contributions limits for these two types of retirement plans are not connected. This is true regardless of whether your contributions go into the traditional pre-tax TSP or the Roth TSP. So in your example, the IRS permits total contributions across both plans of up to $22,000 per year as long as you are eligible and have the income to support the contributions."

"On a related note, when it comes to Roth IRA contributions, it’s typically wise to consult a CPA or other qualified tax advisor before making them just to make sure you don’t do anything outside the IRS guidelines. IRS Publication 590 has additional information on Roth IRAs you might want to check out as well. Thanks so much for your question and best of luck to you!"

Scott
answered 2 years, 7 months ago

Part of the advantage of maxing out the TSP contribution is that it lowers our AGI by $18k, right? I'm not sure what the tax brackets are (off the top of my head) - but maxing out the TSP could lower the tax bracket you're in. Correct?

Are there any disadvantages of maxing out the TSP contribution each year?

I'm thinking maybe some folks would rather contribute enough to get the match, and then invest the rest elsewhere - such as buying non-retirement mutual funds or stocks, etc.

Any thoughts?

Originally Posted by coastalite

Thanks for your reply. I just read through 62 pages of IRS Publication 590 & could not find the answer.

I did find this from someone asking USAA a question almost 3 years ago :

"Can I contribute to Traditional TSP and Roth IRA? What are the defered limits? (I've read $17,000 for Tradtional and Roth TSP).

Given the above, can I combine Traditional TSP at $17,000 a year and also open a ROTH IRA at $5,000 a year? I haven't seen max derefered contributions for Tradition TSP and ROTH IRA."
Asked 2 years, 7 months ago

-------------------------------------

ANSWER:


"Good news!

Yes – as long as you are eligible to make Roth IRA contributions based on your income and tax filing status – you can max out your TSP contribution and max out your Roth IRA contribution in the same year."

"The contributions limits for these two types of retirement plans are not connected. This is true regardless of whether your contributions go into the traditional pre-tax TSP or the Roth TSP. So in your example, the IRS permits total contributions across both plans of up to $22,000 per year as long as you are eligible and have the income to support the contributions."

"On a related note, when it comes to Roth IRA contributions, it’s typically wise to consult a CPA or other qualified tax advisor before making them just to make sure you don’t do anything outside the IRS guidelines. IRS Publication 590 has additional information on Roth IRAs you might want to check out as well. Thanks so much for your question and best of luck to you!"

Scott
answered 2 years, 7 months ago

You are mixing apples and oranges....

Individual Retirement Plan
Pre-tax IRA (Traditional) and post tax IRA (ROTH) with limits of $5,500/$6,500 single and $11,000/$13,000 married. You can contribute to one or the other or both but you cannot exceed $5,500/$6,500. Your income determines eligibility for contribution to ROTH IRA

Employer Retirement Plan
The employer sponsored retirement plan (401k, 403b, TSP) also has a pre-tax (traditional) and post-tax(ROTH) version with limits of $18,000 or $24,000 if you are >50. Again, you can contribute to one or the other or both but you cannot exceed the limit of $18,000/$24,000

You can contribute to both an individual IRA plan and a employer sponsored retirement plan (401k, 403b, TSP) at the full limits established for each (assuming you meet eligibility criteria for ROTH contributions).

Your spouse can move money around in her 401k plan but she cannot make contributions to it.

https://personal.vanguard.com/us/ins...ibution-limits

Originally Posted by jpcavin

You are mixing apples and oranges....

Individual Retirement Plan
Pre-tax IRA (Traditional) and post tax IRA (ROTH) with limits of $5,500/$6,500 single and $11,000/$13,000 married. You can contribute to one or the other or both but you cannot exceed $5,500/$6,500. Your income determines eligibility for contribution to ROTH IRA

Employer Retirement Plan
The employer sponsored retirement plan (401k, 403b, TSP) also has a pre-tax (traditional) and post-tax(ROTH) version with limits of $18,000 or $24,000 if you are >50. Again, you can contribute to one or the other or both but you cannot exceed the limit of $18,000/$24,000

You can contribute to both an individual IRA plan and a employer sponsored retirement plan (401k, 403b, TSP) at the full limits established for each (assuming you meet eligibility criteria for ROTH contributions).

Your spouse can move money around in her 401k plan but she cannot make contributions to it.

https://personal.vanguard.com/us/ins...ibution-limits

OK, so we are under age 50. Married filing joint. Make well under the limit. So, we can contribute $18K to TSP AND $5500 ROTH IRA (MINE) + $5500 (SPOUSE) = $29,000K.

Correct?

As for the spouse's 401k IRA ROLLOVER (from old job) - that HAS TO just sit there - UNLESS she wants to roll it into her ROTH IRA as a ROTH CONVERSION and pay the income taxes on it now (rather than later).

I just spoke to Vanguard - a "retirement specialist" and he looked over our account and confirmed that we are indeed eligible to contribute $18K TSP + $5,500 ROTH + $5,500 ROTH = a grand total of $29,000 in contributions for 2015 (not including the TSP matching).

So, for anyone not sure about how much they can contribute and to what... that is confirmation straight from Vanguard.

As for the old 401k rollover - it is in a traditional IRA and can be converted into the ROTH IRA (either incrementally each year - or all at once - but we will owe taxes on it and it might bump us up into the next tax bracket). However, doing the Traditional IRA to ROTH IRA conversion has no bearing whatsoever on us maxing out the TSP ($18K) and both ROTH IRA's ($5500 + $5500). I hope that helps others in similar boat??? Thanks to all! Please comment if anything to add that we might be overlooking.

Originally Posted by coastalite

As for the spouse's 401k IRA ROLLOVER (from old job) - that HAS TO just sit there - UNLESS she wants to roll it into her ROTH IRA as a ROTH CONVERSION and pay the income taxes on it now (rather than later).

i can't speak to the investing technicalities of all this stuff, but i can tell you this: if she wants to roll it over or whatever you better let her or else you are going to be in a world of hurt that makes any tax consequences seem tame. perhaps my relationships have worked out differently than yours, but you are definately on your own on this one.

Originally Posted by burrocrat

i can't speak to the investing technicalities of all this stuff, but i can tell you this: if she wants to roll it over or whatever you better let her or else you are going to be in a world of hurt that makes any tax consequences seem tame. perhaps my relationships have worked out differently than yours, but you are definately on your own on this one.

Hehehehehe. Yeah, she's a Taurus... I've learned one thing: you DON'T MESS WITH A BULL!!!

Originally Posted by coastalite

Part of the advantage of maxing out the TSP contribution is that it lowers our AGI by $18k, right? I'm not sure what the tax brackets are (off the top of my head) - but maxing out the TSP could lower the tax bracket you're in. Correct?

I think people confuse what the brackets represent. Yes, it is great to pay the lowest taxes possible but just because you cross a bracket, doesn't mean you're getting fleeced. Just the money that is in that bracket is taxed at a higher rate.

Originally Posted by coastalite

Are there any disadvantages of maxing out the TSP contribution each year?

Not having enough to pay your bills today? The real issue about maxing out your contributions is how you expect them to paid out when you retire. You have to ask tax-deferred versus/combined tax exempt. Your goals for retirement should paint a good picture for you to determine asset allocation.

Originally Posted by coastalite

I'm thinking maybe some folks would rather contribute enough to get the match, and then invest the rest elsewhere - such as buying non-retirement mutual funds or stocks, etc.

Your goals for retirement should paint a good picture for you to determine asset allocation.
Any thoughts?

Originally Posted by Frixxxx

I think people confuse what the brackets represent. Yes, it is great to pay the lowest taxes possible but just because you cross a bracket, doesn't mean you're getting fleeced. Just the money that is in that bracket is taxed at a higher rate.

Coastalite, what Frixxxx said is exactly right, and is a very common misconception. Heck I'm convinced more people believe in the incorrect way income tax "brackets" work than the correct way.

I always tell people:

Don't think of it like tax brackets... think of it like tax buckets.

If the tax "brackets" were
0-20k at 10%
20k-30k at 15%
30-50k at 20%
50k-100k at 25%
100K+ 30% ... I just picked numbers.

As you earn money, your "tax buckets" fill up from the beginning.

So your first 20k goes into the 1st bucket (and is taxed at 10%). Once that bucket is filled, you start filling up the 15% bucket.
When the 15% bucket is full (You've now earned $30k), you start filling up the 20% bucket.
When the 20% bucket is full (You've now earned $50k), you start filling up the 25% bucket.

The money in each bucket is only taxed at its associated percentage and doesn't care about any of the higher-tier buckets or how full/empty they are.