We live in California, and I recently started a part-time job earning $18/hour for three days a week. My husband, who makes $120k a year, says we’re paying more in taxes because we file jointly. He’s encouraging me to open a 401k and contribute monthly, but I’m unsure if my employer offers that option. I’m not well-versed in taxes or finances and haven’t worked in a long time—this is my first steady part-time job. I didn’t think my income would be taxable since it’s under $4,000 a year. I’m unsure if opening a personal 401k is beneficial or even possible. Any advice?
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An employer-sponsored account is a 401k. You cannot open one on your own if your employer does not offer one.
Still, you can open an IRA.
Even though you were unemployed, you were still able to start an IRA because of your husband’s income.
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In this scenario, there’s nothing intrinsically wrong with a taxable broking account. It is advisable to exercise prudent asset allocation across your extensive portfolio, retaining investments in the taxable broking that yield little to no dividend income.
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If your spouse filed as single or as MFS and you were not married, he would have to pay higher taxes.
But if you can, open an IRA and make contributions to it.
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You can open a 401(k)-style account, which has the same tax benefits as an Individual Retirement Account (IRA).
It makes no difference how the revenue is split between you because you file jointly. The tax on $120,000 plus $4000 equals the tax on $62,000 plus $62,000.
Are you a W2 or 1099? In either scenario, an IRA is possible (with a $7k cap in 2024). If 1099, you can also open a single 401(k).