I am just starting this whole investing journey so I am trying to educate myself on these rules.
A hypothetical: Let's say I only make 10,000 a year… and I put it ALL into my job's ROTH 401k as I earn the money (100% of each paycheck)…
However, I also want to open a Roth Ira and put the max 7000 allowed into it (I would do this from my personal savings account since I already put 100% of my paychecks this year into my Roth 401k with my employer, so I don't have any actual "earned income" leftover after the 401k to put into the IRA)…
IS THIS EVEN ALLOWED??
From what I understand I can only put "earned income" per year into a Roth Ira, but if I already put all of this year's earned income into my 401k then does that mean I have no earned income left that I am LEGALLY allowed to put into a Roth Ira since that would exceed the amount of money I earned this year (10,000 + 7,000 would be 17,000 total which exceeds my yearly earned income of 10,000)….?
Thanks in advance for anyone's advice/help!
Question about "earned income" when it comes to having both a Roth/Traditional 401k and a Roth/Traditional IRA…
byu/WyzeLady ininvesting
Posted by WyzeLady
3 Comments
No you can’t put more than you earn
This isn’t answering your question, but something to be aware of. It varies 401k to 401k, but most plans won’t let you contribute 100% of your salary to the plan. Taxes need to come out of your paycheck also so every 401k that I have had limits contributions to 75% of your income.
You are right to question this. If you contribute all of your income into a 401k then you have no earned income left to put into the Roth IRA.