Roth 401(k) plans offer tax-free withdrawals in retirement. Unlike traditional 401(k) plans, Roth 401(k)s have income limits that determine eligibility. These limits are based on your modified adjusted gross income (MAGI). For 2023, the MAGI limit for Roth 401(k) contributions is $138,000 for single filers and $218,000 for married couples filing jointly. If your MAGI exceeds these limits, you can still make traditional 401(k) contributions, but you won’t be eligible for the Roth 401(k) tax benefits. The income limits for Roth 401(k) contributions are adjusted annually for inflation.
Roth 401(k) Contribution Limits
Unlike Roth IRAs, Roth 401(k) plans do not have income limits for contributions. However, there are annual contribution limits for Roth 401(k) plans, just like traditional 401(k) plans. These limits are set by the IRS and are subject to change each year.
For 2023, the Roth 401(k) contribution limit is $22,500. Individuals who are age 50 or older by the end of the calendar year can make catch-up contributions of up to $7,500, for a total limit of $30,000.
Additional Rules for Roth 401(k) Contributions
- Roth 401(k) contributions are made on an after-tax basis, meaning that they are deducted from your paycheck after taxes have been taken out.
- Roth 401(k) contributions grow tax-free while invested, and qualified withdrawals are tax-free as well.
- Roth 401(k) contributions are subject to the same vesting rules as traditional 401(k) contributions. This means that you may not have immediate access to all of the money you contribute to your Roth 401(k) plan if you leave your job before you are fully vested.
| Age | Contribution Limit | Catch-Up Contribution Limit | Total Limit |
|---|---|---|---|
| Under 50 | $22,500 | $0 | $22,500 |
| 50 or older | $22,500 | $7,500 | $30,000 |
Income Limits for Roth 401(k) Contributions
Roth 401(k) contributions offer tax advantages and can help you save for retirement. However, eligibility for Roth 401(k) is subject to income limits, which vary based on your filing status.
Eligibility Based on Filing Status
- Single: Less than $138,000
- Married filing jointly: Less than $218,000
- Married filing separately: Generally not eligible
- Head of household: Less than $182,000
If your income exceeds these limits, you may still be able to make Roth 401(k) contributions, but they will be subject to income taxes and may not be eligible for the Saver’s Credit.
Phase-Out Ranges for Roth 401(k) Contributions
- Single: $129,000 to $138,000
- Married filing jointly: $204,000 to $218,000
- Head of household: $172,500 to $182,000
Within these phase-out ranges, contributions are gradually reduced based on your income.
Table of Roth 401(k) Income Limits
| Filing Status | Eligibility Limit | Phase-Out Range |
|---|---|---|
| Single | Less than $138,000 | $129,000 to $138,000 |
| Married filing jointly | Less than $218,000 | $204,000 to $218,000 |
| Married filing separately | Generally not eligible | N/A |
| Head of household | Less than $182,000 | $172,500 to $182,000 |
Eligibility for Roth 401(k) Plans
Roth 401(k) plans are employer-sponsored retirement savings plans that allow employees to contribute after-tax dollars, which means they are not taxed when they are withdrawn in retirement. In order to be eligible to contribute to a Roth 401(k) plan, you must meet the following requirements:
- You must be a W-2 employee of the company that offers the plan.
- You must be under the age of 50 as of December 31st of the year in which you wish to contribute.
- Your modified adjusted gross income (MAGI) must be below certain limits. For 2023, the MAGI limits are as follows:
| Filing Status | MAGI Limit |
|---|---|
| Single | $138,000 |
| Married filing jointly | $218,000 |
| Married filing separately | $0 |
| Head of household | $204,000 |
If your MAGI exceeds the limit for your filing status, you will not be eligible to contribute to a Roth 401(k) plan. However, you may still be eligible to contribute to a traditional 401(k) plan, which allows employees to contribute pre-tax dollars.
Income Limits for Roth 401(k) Contributions
A Roth 401(k) is a retirement savings account that offers tax-free withdrawals in retirement. However, you must meet certain income limits to contribute to a Roth 401(k).
Income Limits for 2023
- Single: $138,000
- Married filing jointly: $218,000
- Married filing separately: $0
If your income exceeds these limits, you may still contribute to a Roth 401(k), but your contributions will be subject to income taxes. The amount of tax you will pay depends on your income and filing status.
Employer Matching Contributions
Employer matching contributions to Roth 401(k) accounts are not subject to income limits. This means that your employer can contribute to your Roth 401(k), even if you exceed the income limits. However, your employer’s matching contributions will be included in your taxable income.
Table: Contribution Limits for Roth 401(k)
| Filing Status | Income Limit | Contribution Limit |
|---|---|---|
| Single | $138,000 | $22,500 |
| Married filing jointly | $218,000 | $22,500 |
| Married filing separately | $0 | $0 |
Cheers and thanks for sticking with me to the end of this Roth 401(k) income limit deep dive. I hope you now have a clearer understanding of who is eligible to contribute to this retirement savings powerhouse. If you’re not quite ready to make a move, don’t sweat it. Check back later – I’ll be here, ready to help you navigate the world of retirement savings whenever you’re ready. Take care, and happy saving!