Tax-free income in retirement sounds great, doesn’t it? Well, it’s available in retirement accounts today with Roth savings. When you save with “Roth” dollars, you agree to show the amount you contribute as taxable income in that year, giving up the tax deduction received with “Traditional or Pretax” savings. In exchange, all qualified withdrawals from Roth accounts are income tax-free, making them a better deal for many.
When most people think of Roth savings, the Roth IRA comes to mind. Unfortunately, not all workers can contribute to Roth IRAs because of income limits. In 2023, single filers with incomes above $138,000 and married filing jointly with incomes above $218,000 are not able to save directly in Roth IRAs.
But here’s the good news: these income limits do NOT apply to workplace Roth accounts. Contributions are limited only by the Federal contribution limits that apply to everyone. For 2023 those limits are $22,500 with an additional $7,500 for those over 50. Keep in mind, though, some employer plans have their own percentage savings limits.
It’s easy to change your workplace savings to Roth. Just access your plan’s participant website and click on Contributions.