Does 401k rollover count towards Roth IRA contribution limit?

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  • #91923 Reply

      Quick question that I can’t seem to find the direct answer to.

      I have an old 401k from an employer that I wasn’t with very long that has about $2k in it. My question is, if I roll that over into Roth IRA, does that $2k go towards my “maximum” amount that I can contribute for the year.

      Ex: If the Roth IRA only allows me to contribute $6500 for this year, after I roll over the $2k, will I only be able to contribute $4500 for the remainder of the year?

      Thanks for any help!

      #91924 Reply

        No, a rollover is a contribution from a previous year and has no bearing on your limit. So, you can roll it over and still contribute the full $6,500 this year.

        #91925 Reply

          I should add its best to have your new institution request the transfer directly from your 401k plan. The only time I’ve seen someone run into a problem is if the distribution and deposit are not coded correctly to reflect it’s a rollover.

          The easiest way to avoid this situation is by completing a trustee to trustee transfer where you never physically handle the funds.

          Take a peek at: Maximizing Investments: Utilizing ESPP for Roth IRA Contributions

          #91926 Reply

            If you are rolling over from a Traditional 401k you would roll into a Rollover (traditional) IRA not to a Roth IRA, though you could later decide to do a Roth IRA conversion.

            Rollovers are not contributions.

            #91927 Reply

              No it will not impact your contribution limit. The limit will still be $6,500 for 2023.

              #91928 Reply

                Neither a conversion nor rollover count as a contribution.

                You will have to pay tax on the entire amount you convert unless it’s coming from a Roth 401k.

                Don’t miss: Maxed 401k, start index funds: 1 per pay period, Fidelity, DIY or advisor? Good strategy? Recommended funds?

                #91929 Reply

                  If it tradition 401 usually it rolls into traditional IRA or you will have taxes to pay. It doesn’t count towards contribution limits typically since it rollover.

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