Reply to Explain like I'm 5... maxing out retirement

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I feel like I am smarter than this post will make me sound, but I cannot figure out what maxing out retirement means.

Let's say I have access to four retirement vehicles:
Traditional 401k through work
Roth 401k through work
Roth IRA
Traditional IRA

My income puts me out of the running for a Roth IRA, so I'm down to three options.

I can put $6k into my Traditional IRA, right? Regardless of any 401k investments?

Now where I'm really stuck... $20,500 is the maximum for the TOTAL of my traditional and Roth 401ks, right? Or can I contribute that in EACH?

So if I'm understanding correctly, the absolute maximum I can contribute in a given year is $26,500?

(for the sake of this question let's ignore Backdoors, that feels like a problem for another day...)[/quote]

- 401K - $20,500 is the max you can contribute to a 401K - Regular or Roth.  If you are over 50, you can contribute another $6500.  At your income level, a Roth 401K does not make sense.
- 401K - Check if your company has a mega-401K.  This allows you to contribute after-tax $$ in addition to the 20,500 to your 401K and convert that to a Roth (aka mega-backdoor Roth).
- IRA - You can contribute to either a traditional or Roth IRA.  At your income level, you can contribute to a Traditional IRA and convert that to a Roth (backdoor Roth).  $1000 more if you are over 50.  You cannot deduct contributions to a Traditional IRA so kinda pointless unless you do plan on converting to a Roth.
[/quote]

This is a good explanation. The recommendation if you can afford to do this is max out: traditional 401k, HSA (if eligible), back door Roth IRA, and mega back door Roth IRA (if available to you).

Most people are eligible for 20,500 (401k), 6000 (back door Roth IRA).
Some are married so can double that number
[b]Some are over 55[/b] so can contribute additional catch up amounts
Some have access to HSA and mega-back door Roth IRA so can contribute more after tax up to 61,000 total in each 401k.

It depends on your situation, maxing means putting the most you can in all of the available options you have.

[/quote]

This is a good summary, although the catch-up trigger age is 50, not 55.  [/quote]

DP.  It is 55 for HSA (extra $1000)[/quote]

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