Setting Yourself Up for Success
As a recent college graduate, you’ve taken a significant step towards building a strong financial foundation by contributing to tax-advantaged retirement accounts. Congratulations on landing your new job and thinking ahead!
Roth IRAs and 401(k)s: Understanding the Rules
You’ve contributed $7,000 to a Roth IRA earlier this year, but now you’re wondering if you can participate in your new employer’s 401(k) plan. The good news is that your Roth IRA contribution doesn’t affect your eligibility to participate in the 401(k) plan, as long as you meet your employer’s requirements.
Annual Contribution Limits
Keep in mind that both Roth IRAs and 401(k)s have annual contribution limits:
- IRA limit: $7,000 in 2024 and 2025 (if under 50)
- 401(k) limit: $23,000 in 2024 and $23,500 in 2025 (if under 50)
- Catch-up contributions: Additional $1,000 to IRA and $7,500 to 401(k) if 50 or older
Employer Matches and Income Limits
Your employer’s contribution to your 401(k) cannot exceed $69,000 in 2024 and $70,000 in 2025. Additionally, Roth IRA contributions are subject to income limits:
- Single filers with MAGI under $146,000 in 2024 and $150,000 in 2025 can make a full contribution
- Those with MAGI between $146,000 and $161,000 can make a partial contribution in 2024
Eligibility Requirements
To participate in your company’s 401(k) plan, you must meet the minimum IRS rules:
- Be at least 21 years old
- Have been employed for at least one year
However, your employer may adopt less restrictive eligibility rules.
Continuing to Contribute
You can still contribute to your 401(k) even though you maxed out a Roth IRA earlier in the year. As long as you stay under the Roth IRA income limit and have enough earned income, you can continue to contribute to both accounts.
Seeking Professional Guidance
If you need help navigating your retirement options or creating a comprehensive financial plan, consider working with a financial advisor. They can provide personalized guidance tailored to your unique situation.
Finding the Right Advisor
When searching for a financial advisor, look for someone whose services and expertise align with your needs. Some advisors specialize in investment advice, while others offer estate planning, tax planning, and more.
Taking Control of Your Finances
By understanding the rules and taking advantage of tax-advantaged retirement accounts, you’re setting yourself up for long-term financial success. Keep building on this strong foundation, and you’ll be well on your way to achieving your financial goals!
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