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22 votes
Accepted

Why are there income limits for Roth IRAs?

Because Congress said so. Now, if you're asking for the legislators' rationale, it's something along the lines of: We only create tax shelters when we "need" to; otherwise we just make our deficit ...
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  • 490
21 votes

How does one get the 401(k) max contribution of 57K?

I think the currently accepted answer misses the most typical way that larger contributions can be made. The $19.5k limit applies to employee pre-tax and Roth contributions. Employee after-tax ...
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  • 28.1k
20 votes

cosign a car loan, what is true $ risk

You asked: In a unlikely case of my friend not paying the car, I suppose the bank will use the lien and will sell the car first and will ask me to pay any difference. No. If your friend does ...
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  • 29.9k
17 votes

Does employer matching count toward the yearly 401(k) limit?

Employer contributions do not count toward the individual contribution limit, which for 2017 is, 18K. However they do count toward the combined contribution limit, which for 2017, is 54K. See this ...
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  • 74.9k
16 votes
Accepted

Is an employer within their rights to limit 401k contributions to 25% of compensation?

Yes, they are within their rights to do so. The dollar limit of $18,000 (in 2015) and percentage limit of 100% are the maximum an employer can allow an employee to contribute, but the employer can set ...
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  • 4,624
16 votes
Accepted

If I have a 401k for a partial year can I still contribute the maximum amount?

I moved from a job that did not have a 401k plan to a job that does have a 401k plan. I have not contributed to any other IRA or 401k so far this year. Because you have not contributed any money ...
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14 votes

cosign a car loan, what is true $ risk

Your question seems to be based on an incomplete understanding of the mechanics of how banks pursue loans when things go poorly. I'm saying this because of they way you described the situation here: ...
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  • 16.7k
13 votes
Accepted

Why do tax-advantaged retirement accounts have contribution limits?

If there were no contribution limits, you could shelter practically all of your income from income tax. The government would not have sufficient tax revenue. Hence, there are limits which ensure some ...
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  • 31.4k
13 votes
Accepted

How does one get the 401(k) max contribution of 57K?

Employers can offer matches more than 100%, and can also offer contributions that are not tied to your contributions. This increases participation without forcing employees to contribute, which helps ...
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  • 113k
12 votes
Accepted

Why are excess HSA/IRA/401k/etc contributions allowed?

Some institutions enforce the limits, some don’t. However, one aspect that you may not realize is that they really don’t know what your contribution limits are. Lots of things affect your contribution ...
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10 votes

Why are there income limits for Roth IRAs?

A Roth IRA is still a tax shelter. It allows for tax-free gains.
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  • 179
10 votes
Accepted

Why is the total 401(k) contribution limit (employee + employer) so high?

Because 401k's are also used by self employed. A person who has a schedule C profitable income can open a 401k and "match" in whatever ratio he wants, up to 25% of the net profits or the limits you ...
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  • 127k
10 votes

Can I cosign a car loan up to a limited amount?

No. No lender is going to touch such a weird deal, because it breaks all their risk models. Further, it doesn't work like that. The usual bad outcome is blam, suddenly there's a rather bad mark ...
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9 votes

What is the penalty for contributing to a Roth 401k when my AGI is over the limit?

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 ...
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8 votes

Can I contribute money to a 401k, 457b, and an IRA all at the same time?

Many times the best info is from the IRS: How Much Salary Can You Defer if You’re Eligible for More than One Retirement Plan? The amount of salary deferrals you can contribute to retirement plans ...
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8 votes
Accepted

When calculating Roth IRA contribution limit, is MAGI for previous or current year used?

The Roth IRA contribution income limit is based on the current year (2019)'s MAGI. If you are not sure whether you will be over the limit or not, you can 1) wait until January 1 - April 15 of 2020 to ...
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  • 15.7k
7 votes
Accepted

IRA yearly contribution limit

are you allowed to open multiple IRAs? Yes - but the contribution limit applies to all IRAs in total, so you cannot go over that limit by contributing to multiple IRAs. I was curious what people ...
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  • 113k
6 votes

How do rich people guarantee the safety of their money, when savings exceed the FDIC limit?

I found out there is something called CDARS that allows a person to open a multi-million dollar certificate of deposit account with a single financial institution, who provides FDIC coverage for the ...
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  • 3,393
6 votes
Accepted

Closing credit card to increase limit on another

If the cards are with different banks, this is likely to make things worse instead of better, because it will cause your total card utilization to go up and alter the average age of open accounts. ...
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  • 2,904
6 votes
Accepted

Max Contribution to IRA, Roth, and Both

When they say your total contributions do they mean combined traditional and Roth IRA, or do they mean traditional, separate, Roth separate? Yes, they mean that the amount you contribute to ...
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  • 15.7k
6 votes
Accepted

How are contribution limits enforced on Roth IRAs for people with high income?

It is enforced long before distribution time. By May 31st of each year the trustee sends a copy of IRS form 5498 to you, they also send a copy to the IRS. This form tells the IRS that you made an ...
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6 votes

Can I cosign a car loan up to a limited amount?

My rule is very simple: If you have the money and want to give it to your friend, give him the money. If you don’t have the money, or don’t want to give it to your friend, don’t give him the money. ...
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  • 20.8k
6 votes
Accepted

Does your 401k provider stop you when you hit your max?

Does your 401k provider stop you when you hit your max? Here is a bogleheads discussion on the topic. Apparently different employers do different things. https://www.bogleheads.org/forum/viewtopic....
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  • 48.7k
5 votes

Why would someone want to contribute post tax to a 401k?

Back in the day when it wasn't possible to see your balance everyday or make changes every paycheck it was much more difficult to hit the max contribution exactly. We could only tell them what percent ...
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5 votes
Accepted

Why do employer contributions count against HSA limits?

am I comparing apples and oranges? Yes - different purposes, different laws, different regulations. One rationale could be that HSA benefits are immediate while retirement benefits are deferred, so ...
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  • 113k
5 votes
Accepted

401(k) lump sum distribution limited because of highly compensated employees?

It's legal. In fact, they are required to do this, assuming you are in fact a HCE (highly compensated employee) to avoid getting in trouble with the IRS. I'm guessing they don't provide documentation ...
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  • 743
5 votes
Accepted

What are the limits for 401k and Roth IRA contributions and if I can catch up for the years missed?

While pretax 401k's and Roth IRAs are popular, there are also Roth 401k's and pretax (traditional) IRAs. Limits are separate for 401k's (up to $19k in 2019) and IRAs (up to $6k), but apply across ...
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  • 28.1k
5 votes
Accepted

Can I contribute to two different calendar years in an IRA?

Are you sure it's actually 2020 and 2021 instead of 2019 and 2020? If yes, then I would contact your broker because I believe it is a bug in their software and/or a misprint. Right now you should be ...
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  • 45.2k
5 votes
Accepted

Roth IRA conversion and income limit

No, the Roth IRA income limit for contributions is based on current year MAGI. The previous year's MAGI has no impact.
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  • 14.6k
4 votes

Why is the total 401(k) contribution limit (employee + employer) so high?

Some 401k plans allow you to make "supplemental post-tax contributions". basically, once you hit the pre-tax contribution limit (17.5k$ in 2014), you are then allowed to contribute funds on a post-tax ...
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  • 2,802

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