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Specifically, my wife has a Roth 401k and I have a traditional 401k; we married in the middle of last year, and our combined AGI for last year is well above the limit for contributions to a Roth account of any kind.

My primary question(s):

  • If we file our taxes jointly, will we pay a penalty of some kind for having her contributing (along with employer matching) to the Roth 401k during a year when our combined incomes are above the AGI limits? I can find plenty of reference to the limits themselves, but nothing relating to the penalty for ignoring them.

  • Edited to add: While I was incorrect in thinking the Roth 401k shared the same limits as a Roth IRA, the answer provided does bring up another question: if my wife opens for herself a Roth IRA to roll this Roth 401k balance into (assuming there is no Roth 401k at her new employer) will she be subject to our joint income at that time for the Roth IRA contributions (the entire rollover balance being the contribution)? In that case, will we need to file separately that year? As I understand it (maybe totally wrong, again) when rolling a balance over from a 401k of either type to an IRA of either type the yearly contribution limit does not apply to that transfer. Is the yearly income limit also exempted for the one-time transfer?

My secondary questions:

  • Is there a one-time exception for something like this? She contributed during a year when we were both married and not married. Alone, she would not have reached the AGI limit.
  • Now that we're married, and I didn't realize this was an issue until after the beginning of this year, does this mean we need to file separately for last year and this year both and continue to file separately until she stops contributing to a Roth 401k?
  • Do the taxes have anything to do with it? Now that we are married, can she simply no longer contribute to it at all, regardless of how we file our taxes (joint/separate)?
  • When she leaves her current job, will rolling HER Roth 401k into MY Roth IRA be possible? Currently these accounts are in our individual names, and alone I am over the AGI limit for Roth contributions.
  • 2
    In general, 401k accounts cannot be rolled over into an IRA while the employee is still working for the employer sponsoring the 401k plan. (There may be exceptions for employees older than 59.5; I don't remember). So, "I feel like rolling over my 401k into my IRA today" isn't going to work. – Dilip Sarwate Apr 8 '14 at 21:35
  • "the entire rollover balance being the contribution" -- wrong. Luckily for you, rollovers are not treated as contributions. – Ben Voigt Oct 8 '18 at 2:30
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From [Roth-Comparison-Chart][IRS}

Designated Roth 401(k) Account: No income limitation to participate

The lack of an big income limit is a benefit of the Roth 401K. There is no penalty because there is no limit of the Roth version of the 401K. It get the company match, and it grows tax free. There is still a maximum amount that each person can contribute, and that i based on tax year and age, but those are the same a a regular 401K. The contribution limit for 401K plans is the total for each persons 401K regular Plus Roth 401K contributions.

This eliminates your first three secondary question. The 4th question regarding rollovers from her account to your IRA: you can't change social security numbers on the account via a rollover*. The I in IRA stands for Individual.

*: Except in the case of death or official divorce decree.

  • Thanks! I have updated my question to make clearer another case that your answer has made me question. – Bryson Apr 8 '14 at 21:14
  • 1
    don't edit the question, make your additional question a new question. – mhoran_psprep Apr 8 '14 at 22:43

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