Do Contributions to 401K and Roth 401K Reduce AGI and MAGI?

Q. Does contribution to traditional 401K reduce both AGI and MAGI? Does contribution to Roth 401(k) reduce both AGI and MAGI?

A. First, see our blog post about differences between AGI and MAGI.

Now, answers to the two questions:

• Contributions to Traditional 401(k) reduce your AGI and MAGI.
• Implications to you - this means for people who are at income border line for eligibility to contribute to Roth IRA, they should maximize 401K contribution.
• Contributions to Roth 401(k) do NOT reduce your AGI and MAGI.
• Implications to you - this means for people who are at Roth IRA contribution eligibility border line should NOT contribute to Roth 401K, instead, contribute to 401k so you increase your chance of Roth IRA contribution.

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