Roth IRA limits with employer Roth/401k plan in place

[FEDUKE404]

Never mind.

[Gene V]

For you scenario, my answer is Yes. He can contribute to a Roth.
Here is one article and IRS Pub on Roth and Roth 401K

https://www.investopedia.com/articles/personal-finance/063015/roth-401k-vs-roth-ira-one-better.asp

https://www.irs.gov/pub/irs-pdf/p4530.pdf

[Burke]

The employer plan 401K likely has some guidelines on how much the employee can contribute. It may be a fixed percentage of his income, and it may also have "makeup" privileges if he is not contributing the maximum. And of course, there are IRS limitations on how much overall can be contributed, but these would be high-income persons. Since you mention $5,500 I am assuming he is under 55? For 2019, the limit for IRA's is $6,000. So I lost you on the part where you said it was an amt greater than ever could be placed into a ROTH IRA.

[Lion]

Think of it as a 401(k) account and an IRA. The IRA can be limited by a combination of income and being a participant in an employer plan/401(k), but you say that income is NOT high enough for that to come into play. Forget the word Roth. Your client is a participant in an employer plan and also has an IRA. The word Roth mainly has to do with the upfront deductability and the endgame taxability.

If he truly has two Roth IRAs, then there ARE limits. So, are you talking about two Roth IRA accounts? Or a Roth 401(k) and a Roth IRA? The Tax Book has great explanations.

[kathyc2]

Unless they are walking away from employer match, I'd max out the Roth IRA and then put any extra they feel they can set aside to the Roth 401K. Reason being is that unlike a Roth IRA, Roth 401K has RMD's. Although the RMD's would not be taxable, the money would need to be taken out and not continue to grow tax free.

[kathyc2]

I think you are confusing yourself by continuing to call it a "Designated Roth IRA account under an employer's 401k plan" It is NOT a Roth IRA it IS a Roth 401K. Two completely different things. https://www.irs.gov/retirement-plans...mparison-chart

[Anarchrist]

I thought I posed my questions very clearly

Your questions were clear and I believe your thinking in the op is correct. I doubt the code or regs definitively say "you can max out a designated Roth 401k and also max out a Roth IRA". There are rules about maxing out a 401k and rules for maxing out IRAs. If you meet all the conditions, you can do both.

[TAXNJ]

I think you are confusing yourself by continuing to call it a "Designated Roth IRA account under an employer's 401k plan" It is NOT a Roth IRA it IS a Roth 401K. Two completely different things. https://www.irs.gov/retirement-plans...mparison-chart

One of the best reply posts seen a awhile with short and to the point information.

Cant argue with that info. Again, great reply post

[TAXNJ]

OK. I'm game.

After reviewing the IRS instructions for Code AA in Box 12 of a W2, what do YOU want to call it?

I'll help. . .from page 20 of the 2018 IRS W2 instructions:

"Code AA— -- Designated Roth contributions under a section 401(k) plan. Use this code to report designated Roth contributions under a section 401(k) plan. Do not use this code to report elective deferrals under code D. See Designated Roth contributions."

Your reply post is also good with a source that may address and answer the scenario.

Can not be in the “game” or make a ‘call” of a scenario when not compensated or responsible but...
if one is in the “game” and still unsure and is getting compensated to know the answer, one may also consider contacting the w-2 preparer for the “coding” reason(s) for additional support which is better than relying on and/or not agreeing with specific suggestions/answers from non compensated/responsible reply poster(s).

Again, reply poster kathyc2 post gives a great comparison that is short and to the point which one may use for their current and/or future scenario.

[Anarchrist]

Again, reply poster kathyc2 post gives a great comparison that is short and to the point

but doesn't actually address his question

[kathyc2]

but doesn't actually address his question

When has it ever been true that the amount put into individual accounts is reduced by the amounts put into employer accounts?

My point was that Duke kept calling the Roth 401K a Roth IRA, when it is not. the Roth 401K is an employer plan where a Roth IRA is an individual account.

If he put money in a deductible 401K, I doubt it would be questioned that the amount in a Roth IRA would need to be reduced (subject to income restrictions). Just because the word Roth is used does not make a difference. It is still a 401K plan, not an IRA.

[TAXNJ]

but doesn't actually address his question

That is up to the Original Poster.

An Original Poster that is unsure and is getting compensated to know the answer, can consider three options when posting:

1 - Consider the type of reply post from kathyc2 that is short and to the point with a source reference that may provide a better lead to the applicable IRS code section for support of their decision (answer).

Or

2 - your type of reply post without a source reference “… I doubt the code or regs definitively say "you can max out a designated Roth 401k and also max out a Roth IRA". There are rules about maxing out a 401k and rules for maxing out IRAs. If you meet all the conditions, you can do both.” (NOTE: see reply post from kathyc2 that clearly addresses what you are trying to state.)

Or

3 - consider contacting the Original preparer of the document in question for additional support which is better than relying on and/or not agreeing with specific suggestions/answers from non-compensated/responsible reply poster(s).

Again, that decision is up to the Original Poster.