Marriage Event's Impact of Tax Advantaged Accounts

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Hannibal Barca
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Marriage Event's Impact of Tax Advantaged Accounts

Post by Hannibal Barca »

I recently got married and I'm trying to better understand how that impacts my wife and I's tax-advantaged accounts.

Background: We both have our own pre-tax and roth 401ks, and roth IRAs. We both do backdoor Roth IRA contributions ever year. We both max out our 401ks and IRAs every year.

What I don't think is impacted:
-Contribution limits are per person (so $19.5k each for 401k, $6k each for IRA)
-Backdoor Roth IRA capability is preserved. We can each deposit $6k in an IRA and then immediately roll that into a Roth IRA

Does ANYTHING retirement accounts-related change?
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22twain
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Re: Marriage Event's Impact of Tax Advantaged Accounts

Post by 22twain »

If one of you stops working, the non-working spouse can still contribute to a traditional or Roth IRA, provided the working spouse earns enough to cover those contributions, on top of the contributions to his/her own retirement accounts.

This is commonly called a "spousal IRA" even though it doesn't need to be a separate account from one funded with contributions from one's own earnings.
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MrJedi
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Re: Marriage Event's Impact of Tax Advantaged Accounts

Post by MrJedi »

HSAs are a little more nuanced if you have those.
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Hannibal Barca
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Re: Marriage Event's Impact of Tax Advantaged Accounts

Post by Hannibal Barca »

MrJedi wrote: Sun Sep 19, 2021 1:13 pm HSAs are a little more nuanced if you have those.
We don't have HSAs since neither of us have HDHPs, but I was going to set up FSAs for us this year. Are there any FSA nuances?
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grabiner
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Re: Marriage Event's Impact of Tax Advantaged Accounts

Post by grabiner »

Eligibility limits change. Whether you can deduct IRA contributions now depends on your combined income, and on whether the contributing spouse or only the other spouse is covered by a retirement plan. If you are already using the backdoor Roth, you can keep using it.
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BreadandButter
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Re: Marriage Event's Impact of Tax Advantaged Accounts

Post by BreadandButter »

ERISA rules say spouse will now inherit your 401k, in spite of anyone else you may have designated as your primary beneficiary. Probably what you want, but maybe not if you have children already.
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grabiner
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Re: Marriage Event's Impact of Tax Advantaged Accounts

Post by grabiner »

BreadandButter wrote: Sun Sep 19, 2021 4:55 pm ERISA rules say spouse will now inherit your 401k, in spite of anyone else you may have designated as your primary beneficiary. Probably what you want, but maybe not if you have children already.
And the plan may have rules on withdrawals, since those withdrawals affect the spouse's rights. For example, when you leave your employer, you may need your spouse's consent to roll the 401(k) into an IRA. The US Government's TSP requires spousal consent for any TSP withdrawal other than the default annuity option.
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Re: Marriage Event's Impact of Tax Advantaged Accounts

Post by 123 »

grabiner wrote: Sun Sep 19, 2021 1:30 pm Eligibility limits change. Whether you can deduct IRA contributions now depends on your combined income, and on whether the contributing spouse or only the other spouse is covered by a retirement plan. If you are already using the backdoor Roth, you can keep using it.
+1 The tests for IRA eligibility and income/marital status are "as of" the end of the calendar year of the contribution. It is possible that two individuals could make IRA contributions that seemed okay at the time they were made but that a change in marital status could make those contributions excessive and subject to penalty until corrected.
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Hannibal Barca
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Re: Marriage Event's Impact of Tax Advantaged Accounts

Post by Hannibal Barca »

Thanks guys. It sounds like there are some wrinkles for where marriage makes a differences, but big picture our situation hasn't changed. If only marginal income tax rates worked that way!
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