dmertz
Level 15

Retirement tax questions

I think Q1 and Q2 have been addressed previously above.  To summarize:

 

A1.  No.  The limit for Roth 401(k) contributions for 2020 is $19,500, (plus $6,500 catch-up if you are over age 59½, but the catch-up doesn't apply to you since you are 41).  The limit is on the combined total of employee elective deferrals and Roth contributions, so whatever amount of employee contributions you put into the Roth 401(k) reduces the amount that you can put into the traditional 401(k).  This limit applies to all of your employee contributions similar plans in aggregate (but not to 457(b) plans which have a separate limit).

 

A2.  See A1 for the employee contribution limit.  Employer contributions can only be made to the traditional 401(k).  With $100k of SE income and $60k of W-2 income, your maximum employer contribution would be $18,769.

 

You've said that your plan does not allow after-tax contributions to the traditional 401(k) account, so the amount in A1 and this A2 are the maximum permissible, $19,500 employee (traditional and Roth combined) plus $18,769 employer (traditional).  (The amount of your W-2 income as a slight effect on determining the maximum employer contribution in this case.)

 

A3.  Tax rates are lower now than they are expected to be in the future; the tax rates are schedule to revert to the pre-218 rates in 2026.  That means that Roth contributions are likely to more beneficial now than later.  Since you appear to want to put the maximal permissible into in your retirement plan, putting it all into the traditional account could result in large tax bills in the future to get that money back out due to the growth being tax deferred rather than tax free.  Many people fail to plan how and when they will take money out of their retirement plans; it's just as important to get an early start on that planning (now) as it is for putting money into the plans.