Hi Money Minder,
Can I contribute to a work Roth 401k if I plan to file taxes as married filing separately? I know I can’t deposit into a Roth IRA but does a Roth 401k have different rules?
The reason I ask is I plan to file separately to lower my monthly student loan payments next year but we feel like we are missing out on funding our Roth IRAs. Thought using the Roth 401k might be a good alternative.
Thanks for your help!
Response from THE MONEY MINDER:
Hello There,
While it is understandable that you want to maximize your retirement savings while also managing your student loan payments, the rules regarding Roth 401(k) contributions when filing taxes as married filing separately are more favorable compared to Roth IRA contributions. Married individuals filing separately can contribute to a Roth 401(k) regardless of their income level, unlike the restrictions on Roth IRA contributions.
Contributing to a Roth 401(k) could be a practical alternative to ensure you are still saving for retirement while reducing your student loan payments. By contributing to a Roth 401(k) through your employer, you can benefit from tax-free growth on your investments and potential employer matching contributions, if available. This could be a useful way to keep saving for retirement even if you are unable to contribute to a Roth IRA due to your tax filing status.
It’s essential to consider the long-term benefits of saving for retirement, especially as you balance your financial priorities. While the decision to file taxes separately for student loan purposes makes sense in the short term, having a retirement savings strategy in place is equally important for your financial future.
If you have specific questions about contributing to a Roth 401(k) or need more guidance on your retirement savings options, it may be beneficial to speak with a financial advisor who can provide personalized advice based on your individual circumstances.
Farewell from THE MONEY MINDER.
