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Roth IRA Maximums

What are the maximum contribution limits for a Roth IRA and a Roth 401(k)?

By
Elizabeth Carlassare
Episode #014

Today’s topic is Roths to the max!

Jonathan in New Jersey called in with this question about the maximum contribution limits for a Roth IRA and a Roth 401(k):

“Hey Money Girl. This is Jonathan. I’m really enjoying your podcast so far along with Grammar Girl’s. The question I had for you is you mentioned Roth 401(k)s the other day and you mentioned a $15,000 limit. What if you’re at the current tax bracket or current income level where you could conceivably contribute to both a Roth IRA and a Roth 401(k)? Is the limit impacted because of the $4000 limit that you can put into a Roth IRA? In other words, would it drop the amount you could then put in the Roth 401(k)?”

Hey Jonathan. Thanks for the great question. If you’re at an income level where you’re eligible to contribute to a Roth IRA and you can afford to max out both a Roth IRA and a Roth 401(k), go for it! It’s possible to contribute to and max out both! The Roth 401(k) and Roth IRA contribution limits are independent of each other.

Income Eligibility Requirements

You simply need to be sure that you meet the income eligibility requirements for the Roth IRA. If you’re single and your adjusted gross income will be ninety-nine-thousand dollars ($99,000) or less in 2007, you can contribute a full $4,000 to a Roth IRA. If you’re married and file jointly, and your adjusted gross income will be $156,000 or less in 2007, you can each contribute $4,000.

So if you wanted to completely max out your 401(k) and Roth IRA contributions for 2007, you could contribute $15,500 to a Roth 401(k) if your employer offers one or a traditional 401(k). Plus you can also contribute $4,000 to a Roth IRA, for a total contribution of $19,500. Wow!

And if you’re age 50 or older, keep in mind that there are special catch-up contributions. You can contribute an additional $5,000 to a Roth 401(k) or traditional 401(k), and an additional $1,000 to a Roth IRA, for a total maximum contribution of $25,500.

So if you can afford to max out both a Roth 401(k) and a Roth IRA, there’s nothing stopping you!

As always, everyone’s situation is different so it’s a good idea to consult your tax or financial advisor.

Today, I’m giving away a copy of the The Richest Man in Babylon by George Clason. It’s a classic book, originally published in 1926, about the principles of wealth creation and is told in the form of a parable. And the winner is Steve O. Congratulations, Steve! Check your e-mail for instructions.

Cha-ching! That's all for now, courtesy of Money Girl, your guide to a richer life.

Thanks again so much to everyone who has taken a moment to post a review at iTunes! Also, check out the newest Quick and Dirty Tips podcasts: Legal Lad and The Mighty Mommy. Thanks for listening!

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About the Author

Elizabeth Carlassare
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