Tax advantaged account contribution limits

Office Hours
#1

Happy New Years Eve! What a year. I must say that with all that this dumpster fire of a year has bestowed upon us, it also has helped me gain new perspective, and a path toward financial independence. I’m very fortunate to be employed, and simply this year made it easy to save and invest rather than spend.

In the past three years, I’ve gone from debt, to zero net worth, to over 160K! It feels amazing! I am fortunate enough to contribute $2625 a month to investments currently spread across TSP, Vanguard Roth, and a Betterment individual taxable account.

Ok so here’s my simple question… Is the combined limit for tax advantaged accounts 19,500? IE is the limit for both my 401k (TSP) and my Roth? Or can I contribute 19,500 to my TSP and 6,000 to my Roth totaling 25,500? Will the IRS slam me with a 6% tax for exceeding contribution limits? Or is the institution non the wiser?

#2

Hey Phil, Jeremy will probably answer this in detail next week but there is a 19,500 annual limit for 401K’s and IRA’s. You can only contribute 19,500 annually to one, or between the two.

A Roth IRA however is separate and you can contribute 6K annually in addition to the 19,500 between your 401K/IRA

#3

Thank you, Tom for the quick response.

That’s what I thought, just didn’t want to have to pay tax for over contributing. Cheers

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#4

Happy to help! You can find more info on 2021 limits here https://www.investopedia.com/roth-and-traditional-ira-contribution-limits-for-2021-5085118

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#5

I’ll cover this in tonight’s office hours (1/6/2021) with the recording available afterwards on the course site!

If you’re not signed up for office hours, you can sign up here.

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