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Hello,
I have been reading here for a while, and enjoying the conversations. I am hoping some experts can weigh in here.
I am 58 years old and employed at a nonprofit org. I have recently been promoted and am earning a comfortable amount. I have already maxed out my 403b contributions (403b is the nonprofit equivalent of the 401k).
I asked my employer if we have a Roth IRA contribution option and we don’t.
My question is: can I contribute to a Roth IRA on my own? Are there other tax advantaged options for me to contribute to with my recent salary increase?
Thanks to all.
A couple additional questions to ask HR:
1. The following applies if your employer matches up to a certain level of your contribution:
You mentioned you have already frontloaded your entire 403(b) contributions this year. Thus your paychecks for the remainder of the year don’t reflect a contribution you’ve made to the 403(b). Does your employer still make the maximum matching contributions for those paychecks? I’ve read that some employers don’t.
In that case, then, starting next year you need to make sure that you make a contribution to the 403(b) each month that is high enough to earn the maximum match.
2. Does your employer offer a Roth 403(b)? The contribution limit for a Roth 403(b) is usually the same as for a traditional 403(b) and is much higher than for the Roth IRA. Thus, contributing to a Roth 403(b) is a much faster way to build up your after-tax Roth balance.
Also, unlike contributing to a Roth IRA, there are no income limits for contributing to a Roth 403(b).
Note: When you contribute to a Roth 403(b), the employer match goes to the traditional 403(b).
Wow, I am so impressed with the comments below. I’m not sure there is anything left to advise. This is the great benefit of Humble Dollar!
Yes, you can! But, see Jonathan’s post. If you can’t directly contribute to the Roth IRA because your income is too high, you can avail yourself of the Backdoor Roth IRA strategy, which I recommend. My wife and I have done the backdoor for many years since we made too much to just contribute the conventional way.
Great suggestion, Ben. Here’s more on the backdoor Roth:
https://humbledollar.com/money-guide/converting-nondeductible-iras-to-a-roth/
Julie, I also work with a nonprofit organization and have encountered many people who misunderstand what it means to “max out” contributions—I’m sure you’re familiar with the term, but I’ll explain it for others.
Some staff I work with use “max out” to refer to reaching the maximum match the organization provides. For example, if the company matches 3% and they contribute 3%, they believe they’ve maxed out their contributions. In reality, they’ve only maxed out the match, not their total allowable contribution.
For 2024, the maximum contribution limits for a 403(b) retirement plan are:
1. **Standard Employee Contribution**: $23,000
2. **Catch-Up Contribution** (for those aged 50 and over): An additional $7,500, making the total $30,500 for those eligible.
3. **Special 15-Year Rule**: Employees with 15 or more years of service can contribute an additional $3,000 per year, up to a lifetime maximum of $15,000, depending on specific conditions.
Very few staff at our organization actually max out their full contribution.
Always check with your plan administrator or a financial advisor for personalized guidance.
Hi! Yes, I have already contributed this year the full 30,500.
Funding a Roth IRA would be a great idea. But your first hurdle will be meeting the income requirement:
https://humbledollar.com/money-guide/qualifying-for-a-roth-ira/
Thank you!