How much to contribute to Traditional and Roth 401(k)
My daughter, age 36, just started a new job. Pay is $135k. She will contribute 12% to the retirement accounts.
She wants to know how much she should contribute to the Traditional and how much to the Roth.
Thanks for your help.
Terry Says
The company retirement plan is likely a 40l(k) plan, which means the contribution is tax deductible now, but withdrawals will pay taxes at ordinary income rates when she retires.
So if she qualifies, she should make the additional contribution to an AFTER-TAX ROTH IRA.
Now, does she qualify? Well the qualification for a full contribution of $6,000 starts phasing out when you reach a MODIFIED ADJUSTED Gross Income of $129,000 (in 2022) and none is allowed if your single income is above $144,000. So it looks like she might be on the line re allowable Roth contribution amounts.
Here is a link to a calculator she can use to figure out her MAGA.
