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contribution limits on IRA/401k

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  • contribution limits on IRA/401k

    this is a weird question, but let's say you have 6000$ of income + 6000$ gifted from a parent in one calendar year.

    could you contribute 6k to a roth IRA and 6k to a 401k?

    basically, i'm asking can you count your 6k of income twice?

  • #2
    you need $6k in EARNED income (not a gift, rather through a 1099 or W2) to contribute to a Roth IRA. If you earn $6k and put all $6k in there and your parents gift you $6k that is fine...it's almost as if you didn't contribute to your Roth IRA. But no you can't just take their $6k and put that into your Roth IRA because your contribution limit for 2020 is $6k

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    • #3
      Originally posted by JBME View Post
      you need $6k in EARNED income (not a gift, rather through a 1099 or W2) to contribute to a Roth IRA. If you earn $6k and put all $6k in there and your parents gift you $6k that is fine...it's almost as if you didn't contribute to your Roth IRA. But no you can't just take their $6k and put that into your Roth IRA because your contribution limit for 2020 is $6k
      Right, I understand that. But my question is could you contribute another 6k to a 401k in the same year.

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      • #4
        You can contribute up to $19,500 in a 401k in 2020. That's apart from the 6k toward the Roth IRA.

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        • #5
          Originally posted by thyroxine View Post
          this is a weird question, but let's say you have 6000$ of income + 6000$ gifted from a parent in one calendar year.

          could you contribute 6k to a roth IRA and 6k to a 401k?

          basically, i'm asking can you count your 6k of income twice?
          you can, but not how you wrote it.
          once you contribute your max income to a t401k, you no longer have earned income that qualifies you for a rIRA.
          however you could contribute to a r401k, thus preserving your earned income and use the gift to fund the rIRA.

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          • #6
            Originally posted by Peds View Post

            you can, but not how you wrote it.
            once you contribute your max income to a t401k, you no longer have earned income that qualifies you for a rIRA.
            however you could contribute to a r401k, thus preserving your earned income and use the gift to fund the rIRA.
            so you can't use your earned income twice. got it.

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            • #7
              Originally posted by thyroxine View Post

              so you can't use your earned income twice. got it.
              Actually, you can, sometimes

              IRA contribution limit is the lesser of $6000 or your taxable compensation

              if you earn $6k at work and contribute $6k to 401k pretax your taxable compensation is zero. So no IRA

              if you elect $6k Roth deferral your taxable compensation is still $6k so you can contribute $6k to an IRA.

              make sense?

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