Roth 401k Contribution limits reset on job change

Question

I am in my late 20s and am a single filer in US. My current employer and future employer(July '17) both provide Roth 401k plans from the same provider(Fidelity). I am deciding between a)rolling over current Roth 401k into a Roth IRA and b)rolling over to the new employer's Roth 401k. I do not own a traditional or Roth IRA at the moment. My income is about to double, and will put me over the Roth IRA income limits for 2017.

1. Silly question first, if I roll over existing Roth 401k to Roth IRA, will it allow me to put a full $18k in the new Roth 401k from the new employer?

2. How will the employer contributions(since IRS mandates it to be pre-tax) be taxed in scenarios a and b? If I roll the employer contributions to a traditional IRA, will I still owe tax on it? What is the best strategy here?

3. If my employer contributions is less than $5500, can I roll it over to traditional IRA and immediately roll it over to Roth IRA? What are the tax implications?

4. I have read that Roth IRA contributions can be withdrawn penalty-free and tax-free, does the same apply for Roth 401k?

5. I am intending to fund my Roth 401k with up to $40k a year until I save for a down payment for a house, with the plan of letting compounding work for me with a larger capital. Then withdraw only my contributions for the down payment. Is there any problem I am overlooking with this approach? Are there any taxes incurred here? EDIT: I meant after tax 401k Contribution as mentioned in http://www.madfientist.com/after-tax-contributions/. Is it only applicable to traditional 401k? Then, it wouldn't be prudent to do so, since I would not be able to withdraw my contributions without penalty? For example,$18k in Roth 401k, 5k employer contribution, and 17k in after tax contribution to traditional 401k.

Answer 1

if I roll over existing Roth 401k to Roth IRA, will it allow me to put a full 18k in the new Roth 401k from the new employer?

No. The contribution limit for one year is $18k for all employee retirement plans. So since you have already maxed out your contributions with the first 401(k), you will not be able to contribute to the new employer's 401(k).

How will the employer contributions(since IRS mandates it to be pre-tax) be taxed in scenarios a and b? If I roll the employer contributions to a traditional IRA, will I still owe tax on it?

Employer contributions to a Roth 401(k) are treated pretty much the same as a traditional 401(k), which means that they cannot be withdrawn without penalty and tax.

If my employer contributions is less than 5500, can I roll it over to traditional IRA and immediately roll it over to Roth IRA? What are the tax implications?

You can roll over your employer contributions directly to a Roth IRA (I don't think there's a need to roll to a traditional IRA first). You will owe tax on the rollover at your marginal tax rate.

I have read that Roth IRA contributions are withdrawable penalty-free and tax-free, does the same apply for Roth 401k?

Yes

I would roll your old 401(k) into IRAs (converting the employer contributions to a Roth if you can afford to pay the tax in cash). That will give you much more flexibility in your investments since 401(k)s typically have a very limited set of investments that you can choose from.

Answer 2

Rollovers are different than Contributions.

You can rollover any amount as often as you want in every year, as it is basically just a transfer to an equivalent ('already taxed retirement') account. They do not affect the contribution limits.

Contributions to 401k ROTH are limited per calendar year, and it doesn't matter through which employer they are made.
Contributions to ROTH IRAs are the same; it doesn't matter how many you have and to which ones you contribute, the total annual amount is limited per calendar year.

Your follow-up questions mix things a bit together - Roth is already taxed money, non-Roth is yet-untaxed money. Rules are different for both of them.

In total there are four different 'flavors':
401k and IRA, with Roth and non-Roth each:
401k and 401k-Roth are both with an employer, you and your employer can Contribute, and there are annual contribution limits;
Traditional IRA and Roth-IRA are always personal (outside of an employer), only you can Contribute, and there are (other) annual contribution limits.
You can do (unlimited) Rollovers from each 401k version to the respective IRA version;
and you can do (unlimited) Conversions from non-Roth to Roth (you will owe taxes on the amount).
Note the different terms for the various activities.

This results in a multitude of possibilities and limits, it is a bit complicated; consider that the basics.