2X the Contribution, 1/2 the Work

Earning a little income in your retirement years is becoming increasingly common.

Some choose to work part-time for benefits or socialization or fun, and others accidentally make a little extra while pursuing their hobbies or passions.

With a powerful investment portfolio behind these (early) retirees, this income is often just added to a Roth IRA for further tax-free growth.

Now, what if there was a way to double those Roth contributions without working or earning more? Turns out, there is.

Double Dip Roth Contributions

Total compensation

As an employee, every year we receive a Form W-2 Wage and Tax Statement from our employer. This form shares all of our income, benefits, and tax withholding for the year, which we dutifully report on Line 1 of our tax return.

It looks something like this:example form w-2In this fictitious example, I earned $12,000 working part-time for a company called Go Curry Cracker! (What a weird name!) This is shown in Box 1, Wages, tips, and other compensation.

As required, the employer withheld taxes throughout the year, $82 in federal income tax (Box 2), $744 in Social Security tax (Box 4), and $174 in Medicare tax (Box 6.) All together, $1,000 in taxes were withheld from my paychecks, resulting in take-home pay of $11,000.

401(k) Contributions

With $11,000 in after-tax income, how much can I contribute to the company’s 401(k) plan?

The IRS states that annual 401(k) contributions are limited to the lesser of 100% of the employee’s compensation or the annual contribution limit ($19,000 in 2019. Employee’s age 50+ can make an additional catchup contribution.)

100% of our compensation is shown in Box 1. Thus, we can contribute $12,000.

In this example, I choose to make $12,000 in Roth contributions. This is shown in Box 12 with the AA code – “Designated Roth contributions under a section 401(k) plan.”

Had I instead chosen to make $12,000 in Traditional (pre-tax) contributions, these would be shown in Box 12 with code D, and would also be subtracted from the amount reported in Box 1 (See IRS W-2 instructions pdf.) In this case, Box 1 would be changed to zero dollars ($0.00.)

Any matching / employer contributions to the 401k are not shown on the Form W-2.

IRA Contributions

Now that I have made $12,000 in Roth 401(k) contributions with take-home pay of $11,000, how much can our household contribute to IRAs?

IRA contributions cannot exceed the lesser of the annual limit and total earned income. In 2019, the individual IRA contribution limit is $6,000. (Individuals age 50+ can make an additional catchup contribution.)

Total earned income is shown on Box 1 in the amount of $12,000.

As such, I can make a contribution to an IRA in the amount of $6,000 (the individual limit.)

As a married couple, my spouse is also able to make an IRA contribution in an amount equal to the lesser of the individual limit and total household compensation minus any IRA contributions that I make. Or $12,000 total compensation minus my $6,000 IRA contribution = $6,000 spousal contribution.

Total IRA contributions (either Roth or Traditional): $12,000.

Had I elected to make Traditional contributions to my “work” 401(k), reducing the number on Box 1 to zero, we would be unable to make any IRA contributions.


Self-employed individuals don’t receive a Form W-2, and their income for the purpose of determining retirement account contribution limits is based on net earnings.

The difference is due to a deduction for the payment of 1/2 of self-employment taxes (the “employer” half.)

To contribute $12,000 to a solo Roth 401(k) and an additional $12,000 to his/her Roth IRAs, we would need net-earnings from self-employment of ~$12,912 (and 25 cents.)

(To see how this is determined, check out our Self-employment tax / Net earnings calculator.)


Combine with the Saver’s Credit for extra oomph. (Up to a 50% tax credit on retirement account contributions!)


Sometimes IRS math is funny math. That is the case with Roth 401(k) and Roth IRA contributions.

Roth 401(k) contributions are not deducted from W-2 Box 1 total compensation, which is a safe harbor value for determining individual IRA contribution limits. This effectively means we can double contribute.

As such, with as little as $12,000 in gross earned income, a married couple can contribute up to $24,000 to Roth retirement accounts. (More if you are age 50+.)

Double your Roth retirement account contributions without working or earning more! 2X the contribution or 1/2 the work.

Have you double dipped your Roth?