Reply to Why is the Annual Retirement Contribution Still Maxed at $18.5k?

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Reply to "Why is the Annual Retirement Contribution Still Maxed at $18.5k?"

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[quote=Anonymous][quote=Anonymous][quote=TwistdMike]You can max out the deferred contributions of $18,500 to your 401k, [b]then continue with non- deferred contributions up to a total of $50-55k, depending upon age.

Then you can roll the surplus over to a Roth IRA in addition to the $5,500 limit for direct contributions.[/b]

The good thing about an IRA, is you can use the direct contributions as an emergency fund, pulled out without penalties or tax. It’s better not to do for compounded interest growth, but available.

Keeping in mind, you can also open an IRA in your spouses name, if they don’t have one already, adds an additional $5,500 to retirement investments.

Also, if you haven’t filed taxes for 2017 yet, you can contribute $5,500 for last year and again for this year, immediately.
[/quote]

Can you provide some links on that (non-deferred contribution)?  I've tried to find IRS or other authoritative links on that and failed.  Most of the info. that comes up is that you can contribute upto 18,500 and if you do contribute more, the adminstrator will return the excess contribution to you.  If not returned, it will be penalized at 10% per year until it is returned.

To summarize what you are saying, one can effectively contribute $50K into a 401K and roll over $31,500 into a Roth IRA each year regardless of their income?  This would be a sweet deal if possible and everyone on DCUM will be doing it.  Again, appreciate any official links on this..

[/quote]

NP. This isn't [i]exactly [/i]true. A LOT of employers do not allow you to contribute above the IRS max ($18.5k) because it's hard to keep track of, etc. Plus, the max per person is $50-55k including all contributions - matches, profit sharing, discretionary, etc. so you wouldn't want to put your own money in and miss out on the free money. Some employers do allow these contributions (they're referred to as after-tax, not Roth) but again, not very common. It's very hard to find IRS rules about them. I used to work very closely with a large 401k plan that had a lot of participants who made these after-tax contributions over the years, and it was never clear whether they were allowed to roll them to a Roth IRA or not. It was more of a best guess thing.

It is also is incorrect to state "The good thing about an IRA, is you can use the direct contributions as an emergency fund, pulled out without penalties or tax." This is ONLY true of Roth IRAs, not Traditional/Rollover IRAs. [/quote]

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