Maxing out TSP, can I still contribute to a Vanguard Roth IRA?

[chpwolf]

As title says. I'm currently blessed that I can max out my TSP contribution. I have a little from a previous employer currently in a Vanguard Roth IRA as well. Can I also contribute to a ROTH up to the ROTH limits ($7K for me - over 50 and $6K for my non-working spouse) for a total going towards our retirement goals of (2023):
$30K TSP + 5% match
$13K ROTH IRAs @ Vanguard ($7K me, $6K spouse)

Or does the $30K "TSP" limit include external ROTH IRAs as well?
My "big box store" accountant says I can't do both, but everything I'm reading online except what I can find offically (irs.gov, tsp.gov) says you can fully fund both.

Thanks in advance! I tried searching for this, but never found the magic combo of words.

 

[chpwolf]

Never found an answer to this, so we just contributed to spousal non-working traditional IRA. Got a rebate on taxes now, and we'll be in lower bracket @ retirement, so think this worked out for us.

 

[evilanne]

You can still contribute to Roth while maxing out TSP as long as you aren't over the earnings limit.

 

[chpwolf]

Thanks. Are you aware of any TSP/IRS literature that says as much that I can show accountant? They don’t seem to think I can contribute more after maxingmy employer plan.

 

[Cactus]

There are web sites like these that discuss the topic:
https://www.investopedia.com/ask/an...pate-my-employersponsored-retirement-plan.asp
Can I Have Both a 401(k) and an IRA? | The Motley Fool
Can I Have a 401(k) and an IRA? - NerdWallet

If you want something from the IRS you are going to have to dig through IRS publication 590 for the IRA rules. Our TSP would be in the publication covering 401K plans. I don't know the number of that one off the top of my head.

P.S.
I did find this page on the IRS site: https://www.irs.gov/retirement-plan...nt that employees,employees aged 50 and over.

It mentions an annual overall contribution limit of $66,000 for employee + employer matching. That may be what your accountant was refering to.

 

[evilanne]

Thanks. Are you aware of any TSP/IRS literature that says as much that I can show accountant? They don’t seem to think I can contribute more after maxingmy employer plan.

For Roth IRA see https://www.irs.gov/retirement-plans/roth-iras & https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2023. It is based on your Modified AGI (MAGI), it does not matter how much you contribute to TSP unless that puts you over the earnings limit. Any contribution to traditional TSP may impact your MAGI but as long as your MAGI is below the limit for your filing status you can contribute to Roth IRA.

The rules for Deductible IRAs are a little different and are based on MAGI and whether or not you have a retirement plan at work https://www.irs.gov/retirement-plans/plan-participant-employee/2022-ira-contribution-and-deduction-limits-effect-of-modified-agi-on-deductible-contributions-if-you-are-covered-by-a-retirement-plan-at-work

See also https://www.irs.gov/retirement-plan...-you-are-covered-by-a-retirement-plan-at-work

MAGI for Roth https://www.betterment.com/help/retirement-goal-magi-income-calculation or https://www.your-roth-ira.com/modified-adjusted-gross-income.html

Shouldn't your Accountant be able to explain why he thinks that or providing you with reference to support his position?

 

[evilanne]

Never found an answer to this, so we just contributed to spousal non-working traditional IRA. Got a rebate on taxes now, and we'll be in lower bracket @ retirement, so think this worked out for us.

You can still contribute to Roth for 2022 for yourself until tax deadline, April 18, 2023

 

[Boghie]

Chpwolf,

I think evilanne's response is clear, but to make things simpler:

Your contributions to either a Traditional (pre-tax) TSP or a 401(k) do not affect your ability to contribute to a Roth IRA.

What does limit your ability to contribute to a Roth IRA is your adjusted gross income (the MAGI computed while filling out your Federal Income Taxes). The amount you may contribute to a Roth IRA phases out as your income increases.

It is kinda odd that your 'accountant' doesn't know this. Maybe he/she is talking about the phase out based on your income (dependent on how you file).

 

[Boghie]

I think this Investopedia topic "Can I fund a Roth IRA and Contribute to My Employer's Retirement Plan" answers the mail very well...

I see now where your $30K contribution limit to TSP comes from - basically for 2023 a $22,500 401(k) limit + $7,500 catch-up for those over 50.

The Roth IRA limit is managed separately. You and your significant other symbol (just had to do it being that this is 2023 ) each have a limit of $6,500 + $1,000 catch-up. That means that if your significant other symbol is over 50 then each of you have a limit of $7,500 for a total of $15,000.

I would definitely look at finding another accountant. If this chap is going to help manage the transition from retirement asset accumulation to retirement income generation than you might be in trouble...

GLHF

 

[chpwolf]

Thanks, all, been a bit busy lately and unable to respond. The "accountant" is a big box store type that is generally frowned upon in the tax world. I started with them when I had to put our house up as a rental when we moved in 2009, and going to someone else just made it easier to manage my taxes. She *may*? have an accounting degree, but I have no idea the requirements to work at one of those green and white tax companies with 2 letters in their name.

She had whipped out a book with some IRS publications like you all have mentioned, and I even stated it looks to me like it's 'overall' you can contribute more and that section only related to 'company sponsored plans,' so her response was "that is our interpretation of the law and it is certainly open to interpretation another way by others."

I have funds in TSP & Vanguard (small amount in ROTH for both of us, and small amount in traditional IRA for her as well). Wife doesn't work. She's not eligible for the >50 stuff yet. I believe I will be able to contribute the max $6K to her traditional IRA every year and still max out the TSP + catch up for me (and I keep all mine in traditional as I do not *think* I'll be in a higher bracket @ retirement (in 9 years if it goes well enough). I wasn't in the right fund when the mini-crash hit November 2021, so I've got to leave all my $ in S fund until it fully recovers back to those prices. But I have 9 years and 10 months to continue to throw the max at it for growth. Even with the loss 11/2021 to 12/22, I'm still > 8.6% since 2011.

I think for the ROTH part for me, I will put on hold and continue to just pay down mortgages instead. I'd like to thank all of you for your responses. It gives me more to read and digest.

 

[evilanne]

Chpwolf,
Diversity is good in retirement. If you are putting that much away now you may end up in a higher tax brackets at some point like when you hit RMD age or one of you dies and you are filing as Single. But that is an individual decision and paying off the Mortgage is always a good idea
Happy Trails