Both spouses can contribute to a 401k retirement savings plan if their employers offer it. They each have their own separate 401k accounts, and each spouse’s contributions are made on a pre-tax basis, which means that the money is deducted from their paychecks before taxes are calculated. This can result in significant tax savings, as the money grows tax-deferred until it is withdrawn in retirement. In addition, many employers also offer matching contributions, which can further increase the amount of money that both spouses can save for retirement.
Joint 401(k) Account
A joint 401(k) account is not something that is offered to married parties. However, in some scenarios, it may seem as if two people are combining their funds within a single 401(k) account:
- Married and living together, with each spouse having a separate 401(k) account.
- Each spouse individually contributes a portion of the total household income to their own accounts.
- Within each spouse’s individual account, they can elect to manage assets similarly.
In such scenarios, it may appear as if the two are combining their 401(k) funds, however, they are in fact considered separate accounts and none of the funds are jointly owned.
Each spouse has independent control over their own 401(k) account, including the authority to adjust the investment strategy, handle loan requests (if offered) and determine distributions, among other factors. Notably, tax treatment during withdrawals will vary for each individual’s account.
| Year | Contribution Limit |
|---|---|
| 2023 | $22,500 |
| 2022 | $20,500 |
| 2021 | $19,500 |
In 2023, the contribution limit for 401(k) plans has climbed to $22,500, up from $20,500 in 2022. Individuals who are 50 or older may additionally make catch-up payments of up to $7,500.
What is a 401k?
A 401k is a retirement savings plan offered by many employers. It allows employees to save money for retirement on a pre-tax basis, meaning that the money is deducted from their paycheck before taxes are calculated. This can result in significant tax savings, as well as a boost to retirement savings.
Can Both Spouses Contribute to a 401k?
In general, both spouses can contribute to a 401k, even if only one spouse is employed. However, there are some important rules to keep in mind:
- The total amount that can be contributed to a 401k is limited to $20,500 in 2023 (plus an additional $7,500 if you are age 50 or older).
- If one spouse is employed and the other is not, the employed spouse can contribute up to the full limit to their own 401k.
- If both spouses are employed, they can each contribute up to the full limit to their own 401k.
- If one spouse has a 401k and the other does not, the employed spouse can also make catch-up contributions to their spouse’s 401k, up to the annual limit.
Employer Contributions
Some employers also make matching contributions to their employees’ 401k accounts. These contributions are not subject to the annual contribution limit, and they can be a great way to boost your retirement savings.
Table of Contribution Limits
| 2023 | Age 50 or Older | |
|---|---|---|
| Employee Contribution Limit | $20,500 | $28,000 |
| Employer Match | N/A | N/A |
Contribution Limits
Both spouses can contribute to a 401(k) plan, but there are limits to how much you can contribute each year. For 2023, the contribution limit is $22,500 for employees under age 50 and $30,000 for employees age 50 and older.
- The annual contribution limit is the same for both spouses, regardless of whether they have the same employer.
- If one spouse has a 401(k) plan through their employer, the other spouse can still contribute to an IRA.
- If both spouses have 401(k) plans through their employers, they can each contribute up to the annual limit.
| Age | Contribution Limit |
|---|---|
| Under 50 | $22,500 |
| 50 and older | $30,000 |
Can Both Spouses Contribute to 401k?
Yes, both spouses can contribute to a 401k plan, even if only one spouse is employed by the company that offers the plan. However, there are some important rules that apply.
Tax Implications
The tax implications of 401k contributions for married couples are as follows:
- Traditional 401k: Contributions are made on a pre-tax basis, reducing the couple’s current taxable income. However, withdrawals in retirement are taxed as ordinary income.
- Roth 401k: Contributions are made on an after-tax basis, so there is no immediate tax benefit. However, withdrawals in retirement are tax-free.
It is important to note that the amount that each spouse can contribute to a 401k plan is subject to annual limits set by the IRS.
| Contribution Limit | 2023 | 2024 |
|---|---|---|
| Traditional/Roth 401k | $22,500 | $23,500 |
| Catch-up Contributions (age 50+) | $7,500 | $8,000 |
Well, there you have it! Hopefully, you now have a better understanding of whether or not both spouses can contribute to a 401(k). If you’re still confused or have more questions, be sure to consult with a financial advisor. They can help you tailor a retirement savings plan that meets your specific needs. Thanks for reading, and come back soon for more informative money-related articles!