Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

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fantasytensai
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Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by fantasytensai » Mon Oct 16, 2017 9:42 am

A while ago I asked a question about Mega Backdoor Roth, and long story short I was told that I could open a Roth 401k account within my company, and contribute a maximum of 10% of my income to my 401(k) as after-tax contributions, then roll over the after-tax contributions to my Roth 401k along with any earnings (which I will pay taxes on) to my Roth 401(k) account quarterly. This Roth 401(k) account would be separate from my Traditional 401(k) account, which I already contribute pre-tax earnings to.

Since I also have a TIRA account (it's empty, serves solely as a vehicle for annual backdoor Roth conversions) as well as a Roth IRA account with Vanguard, that means I will have: 1) Traditional 401(k) with company; 2) Roth 401(k) with company; 3) Traditional IRA with Vanguard; and 4) Roth IRA with Vanguard.

That just seems like a lot of accounts. I guess my question is simply...is this type of arrangement allowable?

livesoft
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by livesoft » Mon Oct 16, 2017 9:42 am

It is for me.
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ResearchMed
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by ResearchMed » Mon Oct 16, 2017 10:05 am

fantasytensai wrote:
Mon Oct 16, 2017 9:42 am
A while ago I asked a question about Mega Backdoor Roth, and long story short I was told that I could open a Roth 401k account within my company, and contribute a maximum of 10% of my income to my 401(k) as after-tax contributions, then roll over the after-tax contributions to my Roth 401k along with any earnings (which I will pay taxes on) to my Roth 401(k) account quarterly. This Roth 401(k) account would be separate from my Traditional 401(k) account, which I already contribute pre-tax earnings to.

Since I also have a TIRA account (it's empty, serves solely as a vehicle for annual backdoor Roth conversions) as well as a Roth IRA account with Vanguard, that means I will have: 1) Traditional 401(k) with company; 2) Roth 401(k) with company; 3) Traditional IRA with Vanguard; and 4) Roth IRA with Vanguard.

That just seems like a lot of accounts. I guess my question is simply...is this type of arrangement allowable?
The only question, really, is whether someone's Employer plan allows the different types of accounts. That would be up to the Employer. (Our 403b does not offer any Roth.)

Some people (including us) have a 401k/403b plan with a single Employer which offers a choice of Vanguard, Fidelity, and TIAA. We have 403b money (from one Employer) in 403b accounts at all 3 vendors, because of what is offered at each.

Your own IRA/RothIRA with Vanguard (or any other vendor) are completely separate from any Employer plan(s). And you could also have IRA/RothIRA accounts at different vendors (e.g., Fidelity or Schwab...) if you wished. The regular annual limits on contributions would apply to the group of accounts, not to each one.

Also, if you change jobs, you might end up with another 401k/403b plan with the new Employer. (You'd probably have an opportunity to move money from the "old Employer" plan if you wished.)

And don't forget the taxable accounts :wink:

RM
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mopman78
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by mopman78 » Mon Oct 16, 2017 10:10 am

It may be obvious but just in case, I would add that the traditional 401k and roth 401k are subject to the same cap so if you've maxed out contributions to one, you wouldn't have access to the other

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dodecahedron
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by dodecahedron » Mon Oct 16, 2017 10:22 am

Note that if you have a 401(k) with a Roth option as well as an employer match, you will automatically have both a traditional and a Roth, because employer matches MUST go into the traditional account. (Same is true for 403(b) as well.)

travellight
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by travellight » Mon Oct 16, 2017 10:39 am

Yes, it is possible. I have all 4 but my tira has zero balance and it is just a conduit to the roth ira.

SRenaeP
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by SRenaeP » Mon Oct 16, 2017 10:42 am

fantasytensai wrote:
Mon Oct 16, 2017 9:42 am
A while ago I asked a question about Mega Backdoor Roth, and long story short I was told that I could open a Roth 401k account within my company, and contribute a maximum of 10% of my income to my 401(k) as after-tax contributions, then roll over the after-tax contributions to my Roth 401k along with any earnings (which I will pay taxes on) to my Roth 401(k) account quarterly. This Roth 401(k) account would be separate from my Traditional 401(k) account, which I already contribute pre-tax earnings to.

Since I also have a TIRA account (it's empty, serves solely as a vehicle for annual backdoor Roth conversions) as well as a Roth IRA account with Vanguard, that means I will have: 1) Traditional 401(k) with company; 2) Roth 401(k) with company; 3) Traditional IRA with Vanguard; and 4) Roth IRA with Vanguard.

That just seems like a lot of accounts. I guess my question is simply...is this type of arrangement allowable?
Yes, it's possible to have all those accounts open.

You may want to check your 401k details before making any changes. At my megacorp, a Roth 401k is *not* the same as the after-tax 401k. Also note that the $18k contribution limit is across whatever combination you choose between traditional and Roth 401k. So if you start contributing to a Roth 401k, you will need to reduce your trad 401k contributions so as to not exceed the limit.

Where the mega back door Roth becomes useful is when you have an after tax 401k. This is not subject to the $18k limitation but a higher $54k limit across all sources (including any company match).

-Steph

fantasytensai
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by fantasytensai » Mon Oct 16, 2017 10:46 am

Steph, mopman78, would a quarterly rollover of my after-tax contributions to Roth 401(k) count as a "contribution" towards my yearly 18k limit?

mhalley
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by mhalley » Mon Oct 16, 2017 10:51 am

It could get even more complicated, say you start a small business on the side, and start a solo 401k, or get a part time job and get a 403b, then open an HSA, and your wife goes to work and has all the above too.

ResearchMed
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by ResearchMed » Mon Oct 16, 2017 10:52 am

fantasytensai wrote:
Mon Oct 16, 2017 10:46 am
Steph, mopman78, would a quarterly rollover of my after-tax contributions to Roth 401(k) count as a "contribution" towards my yearly 18k limit?
Not one of "them", but the initial contributions to the plans (or to IRA's, etc.) are what "count" in terms of limits.

Once the money is IN those plans, those limits don't apply, although the limits would of course still apply to any *new* money being added.

Whether there are any other types of limits within your Employer's plan is different from the gov limits, in terms of how the money in the plan is apportioned.

RM
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fantasytensai
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by fantasytensai » Mon Oct 16, 2017 10:55 am

ResearchMed wrote:
Mon Oct 16, 2017 10:52 am
fantasytensai wrote:
Mon Oct 16, 2017 10:46 am
Steph, mopman78, would a quarterly rollover of my after-tax contributions to Roth 401(k) count as a "contribution" towards my yearly 18k limit?
Not one of "them", but the initial contributions to the plans (or to IRA's, etc.) are what "count" in terms of limits.

Once the money is IN those plans, those limits don't apply, although the limits would of course still apply to any *new* money being added.

Whether there are any other types of limits within your Employer's plan is different from the gov limits, in terms of how the money in the plan is apportioned.

RM
Thanks RM, I take it from your explanation that as long as I do not directly contribute to the Roth 401k, this would not count towards my 18k limit.

The plan, as outlined in the beginning, is to contribute 10% of my salary as after tax 401k contributions. By definition, that should be outside of the 18k limit. My concern was whether the rollover of that 10% would be counted as contribution. From your reply it seems like it would not be, unless I misunderstand.

My question concerns purely governmental limits.

ResearchMed
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by ResearchMed » Mon Oct 16, 2017 11:00 am

fantasytensai wrote:
Mon Oct 16, 2017 10:55 am
ResearchMed wrote:
Mon Oct 16, 2017 10:52 am
fantasytensai wrote:
Mon Oct 16, 2017 10:46 am
Steph, mopman78, would a quarterly rollover of my after-tax contributions to Roth 401(k) count as a "contribution" towards my yearly 18k limit?
Not one of "them", but the initial contributions to the plans (or to IRA's, etc.) are what "count" in terms of limits.

Once the money is IN those plans, those limits don't apply, although the limits would of course still apply to any *new* money being added.

Whether there are any other types of limits within your Employer's plan is different from the gov limits, in terms of how the money in the plan is apportioned.

RM
Thanks RM, I take it from your explanation that as long as I do not directly contribute to the Roth 401k, this would not count towards my 18k limit.

The plan, as outlined in the beginning, is to contribute 10% of my salary as after tax 401k contributions. By definition, that should be outside of the 18k limit. My concern was whether the rollover of that 10% would be counted as contribution. From your reply it seems like it would not be, unless I misunderstand.

My question concerns purely governmental limits.
I'm not quite sure about what you are describing.
The "gov limits" involve moving money INTO tax-deferred accounts, and involve tax-deferred money.
In terms of "after tax" contributions, I don't know, so sorry if any of what I wrote is "different" for after-tax contributions into assorted "tax-deferred" types of accounts.

RM
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fantasytensai
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by fantasytensai » Mon Oct 16, 2017 11:27 am

ResearchMed wrote:
Mon Oct 16, 2017 11:00 am
fantasytensai wrote:
Mon Oct 16, 2017 10:55 am
ResearchMed wrote:
Mon Oct 16, 2017 10:52 am
fantasytensai wrote:
Mon Oct 16, 2017 10:46 am
Steph, mopman78, would a quarterly rollover of my after-tax contributions to Roth 401(k) count as a "contribution" towards my yearly 18k limit?
Not one of "them", but the initial contributions to the plans (or to IRA's, etc.) are what "count" in terms of limits.

Once the money is IN those plans, those limits don't apply, although the limits would of course still apply to any *new* money being added.

Whether there are any other types of limits within your Employer's plan is different from the gov limits, in terms of how the money in the plan is apportioned.

RM
Thanks RM, I take it from your explanation that as long as I do not directly contribute to the Roth 401k, this would not count towards my 18k limit.

The plan, as outlined in the beginning, is to contribute 10% of my salary as after tax 401k contributions. By definition, that should be outside of the 18k limit. My concern was whether the rollover of that 10% would be counted as contribution. From your reply it seems like it would not be, unless I misunderstand.

My question concerns purely governmental limits.
I'm not quite sure about what you are describing.
The "gov limits" involve moving money INTO tax-deferred accounts, and involve tax-deferred money.
In terms of "after tax" contributions, I don't know, so sorry if any of what I wrote is "different" for after-tax contributions into assorted "tax-deferred" types of accounts.

RM
I think some numbers will help.

I currently contribute $18,000, pretax, to my traditional 401(k) account. My employer matches $7,000. That is $25,000 total contribution.

For next year, I plan to do the same, and also contribute about $14,000 of after tax money. When combined with my pre-tax contributions and employer match, that is $14,000 + $18,000 + $7,000 = $39,000, which is less than the maximum 401k contribution limit of $54,000.

I think where the confusion lies is that there are two limits here - the $18,000 limit for pretax contributions, and the $54,000 limit for total 401k contributions. For my question, I focus solely on the $18,000 limit.

The first question is, can I contribute $18,000 pre tax to my 401k, and then $14,000 after tax to my 401k? I'm pretty sure the answer is yes.

The second question is, assuming the answer to the first question is yes, can I rollover the $14,000 after tax contribution to a Roth 401k within my company? I realize I will pay taxes on any earnings. But I was wondering if I am allowed to do so in the first place, especially considering that I have separate TIRA and Roth IRA account outside my company as well.

Hope that helps.

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oldcomputerguy
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by oldcomputerguy » Mon Oct 16, 2017 11:35 am

My previous employer's 401k plan included both Traditional and Roth 401k accounts (although I only ever contributed to the Traditional plan because they only made the Roth plan available shortly before I retired). At the same time, I also had (and still have) both traditional and Roth IRAs at Fidelity. So yes, it's possible.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

Pigeye Brewster
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by Pigeye Brewster » Mon Oct 16, 2017 12:24 pm

The second question is, assuming the answer to the first question is yes, can I rollover the $14,000 after tax contribution to a Roth 401k within my company? I realize I will pay taxes on any earnings. But I was wondering if I am allowed to do so in the first place, especially considering that I have separate TIRA and Roth IRA account outside my company as well.
Yes. The limitation here is that your company plan document has to allow for in-service transfers of after-tax contributions and it sounds like that is the case.

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BolderBoy
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by BolderBoy » Mon Oct 16, 2017 1:21 pm

livesoft wrote:
Mon Oct 16, 2017 9:42 am
It is for me.
Likewise here.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

mopman78
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by mopman78 » Mon Oct 16, 2017 2:57 pm

Assuming the company plan allows for in-service transfers, it seems like one would have two options, rolling over after-tax non-Roth contributions to the company's Roth 401k or rolling over after-tax non-Roth contributions to an outside Roth IRA. Why should one prefer one choice over the other?

fantasytensai
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by fantasytensai » Mon Oct 16, 2017 3:07 pm

mopman78 wrote:
Mon Oct 16, 2017 2:57 pm
Assuming the company plan allows for in-service transfers, it seems like one would have two options, rolling over after-tax non-Roth contributions to the company's Roth 401k or rolling over after-tax non-Roth contributions to an outside Roth IRA. Why should one prefer one choice over the other?
Simplicity - rolling over to an in-fund Roth 401(k) is automatic. If I roll it over to my outside Roth IRA account, my fund has to cut me a check every time and I have send that check to Vanguard.

mopman78
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by mopman78 » Mon Oct 16, 2017 3:16 pm

Seems that way. I was more asking for myself since I just went through my first MBD rIRA rolloever and the whole check process and just feel dumb for not realizing I could have kept in my company's plan. I guess I'm ok with it since any funds in the roth portion have to be in the same funds as the traditional. By moving money outside to Vanguard, I have more options.

Yet another thing I've learned from this forum.

Spirit Rider
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by Spirit Rider » Mon Oct 16, 2017 4:08 pm

ResearchMed wrote:
Mon Oct 16, 2017 11:00 am
I'm not quite sure about what you are describing.
The "gov limits" involve moving money INTO tax-deferred accounts, and involve tax-deferred money.
In terms of "after tax" contributions, I don't know, so sorry if any of what I wrote is "different" for after-tax contributions into assorted "tax-deferred" types of accounts.
There are no "tax-deferred" limits.

There is an employee deferral limit (2017 = $18K), but employee deferrals can either be traditional pre-tax contributions and tax-deferred earnings or Roth post-tax contributions and tax-free earnings. Employee after-tax contributions are after-tax contributions and tax-deferred earnings. There is an annual addition limit ($54K) of all employee and employer contributions. Whether they are tax-deferred or not has no bearing on the limit.


ResearchMed
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by ResearchMed » Mon Oct 16, 2017 4:31 pm

Spirit Rider wrote:
Mon Oct 16, 2017 4:08 pm
ResearchMed wrote:
Mon Oct 16, 2017 11:00 am
I'm not quite sure about what you are describing.
The "gov limits" involve moving money INTO tax-deferred accounts, and involve tax-deferred money.
In terms of "after tax" contributions, I don't know, so sorry if any of what I wrote is "different" for after-tax contributions into assorted "tax-deferred" types of accounts.
There are no "tax-deferred" limits.

There is an employee deferral limit (2017 = $18K), but employee deferrals can either be traditional pre-tax contributions and tax-deferred earnings or Roth post-tax contributions and tax-free earnings. Employee after-tax contributions are after-tax contributions and tax-deferred earnings. There is an annual addition limit ($54K) of all employee and employer contributions. Whether they are tax-deferred or not has no bearing on the limit.
[emphasis added]

:confused

One can of course "save" as much as one wishes in taxable accounts.

But as far as I know, there are indeed limits to what can be squirreled away each year, tax-deferred in IRA's/etc., and separately, in 401k/403b type accounts through employment, such as the figures you posted.
Even SEP-IRA's have limits, although it's not necessarily a "dollar limit", but a fraction of the self employment income for the year.

Perhaps there are some different rules, without any annual limits, for tax-deferred savings if one owns a business (?) or...??
If so, then apologies, but I wasn't aware of any type of tax-deferred accounts that had no annual limits at all.
(Or perhaps I'm just having a brain hiccup?)

RM
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Spirit Rider
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Re: Is it possible to have a Traditional 401(k), Roth 401(k), Traditional IRA, and a Roth IRA account at the same time?

Post by Spirit Rider » Mon Oct 16, 2017 6:28 pm

You missed my point. There are limits for "tax-advantaged" plans, but not specifically for "tax deferral".

There are both percentage limits and absolute dollar limits for a SEP IRA. It just so happens that contributions to a SEP IRA are only employer contributions which must be tax-deferred, but that is not true of Roth employee deferrals and employee after-tax contributions in 401a, 401k, 403b and 457b plans.

Likewise IRAs do not have a tax-deferral limit, rather a contribution limit. A traditional IRA can receive deductible IRA contributions and non-deductible contributions, with all earnings tax-deferred. A Roth IRA receives post-tax contributions with tax-free earnings.

You might think this is just semantics, but there are significant tax differences in tax-deferred and other tax-advantaged contributions/accounts.

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