401K & IRA

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What tax-advantaged retirement saving accounts are available to amazonians?

You can contribute to Traditional 401k, Roth 401k, or after-tax 401k in company-sponsored plan:

  • Traditional = pre-tax - means that your taxable income is reduced by contribution amount. Withdrawals (including gains) are taxed as regular income.
  • Roth - contributions are taxable, but withdrawals (including gains) are tax free.
  • After-tax (this is different from Roth) - contributions are taxable, and gains are taxable. But this can be used with in-service conversion into Roth 401k or IRA, effectively allowing to contribute more than the regular 401k limits - see “mega backdoor Roth” section of this wiki.

The limit for 2022 contribution

For after-tax contributions, it appears that payroll caps them at (as of 2022) $34,400 for the year. Those who contributed more than that this limit before it was put in place are getting their excess contributions reversed.

The maximum i can contribute is:

20,500 (Trad. 401K) + Conpmany match (2% of 163,900) + 34,400 (Roth IPC 401k)

What action is needed for 401K now?

No action needed

Roth IRA

A 6K roth IRA can be contributed prior to the end of this year.

“backdoor roth IRA” is a process of contributing to a traditional IRA without taking a tax deduction and then converting that balance to Roth IRA tax-free (must have $0 balances in all traditional/rollover IRAs for this!)

Link: https://www.investopedia.com/how-to-set-up-a-backdoor-roth-ira-4584775