Does 401K limit my IRA ?

Question

Hi,

I contribute the max ($5,000) to an IRA every year since I haven't had a 401K.

But this year my employer is offering me in a 401K plan.

If I choose to particpate in the 401K, will this affect my IRA contributions ??

Thanks

Harlan Lunsford · Accepted Answer

By "this year' you mean 2008 I presume. (never ASSume!)

Yes, it could at that. But even if it might limit your contributions to a "regular" (we call 'em traditional) IRA, you might still qualify for a ROTH IRA, which I wholeheartedly endorse. It's the best thing since canned dog food.

ChEAr$, Harlan Lunsford, EA n LA

removeps-groups · Answer

No, your IRA contribution limits are not affected, but the amount you can deduct is. For single taxpayers the phaseout begins at around 52k and ends at 62k -- see the worksheet in the instructions. Be sure to report the non-deductible contributions on form 8606. For the Roth IRA the phaseout is from 99k to 114k. If your income is more than

114k, I recommed you contribute to a traditional IRA and convert it to a Roth when your income drops or in 2010 when supposedly there won't be an AGI limit to add to a Roth or convert a traditional IRA to a Roth.

kastnna · Answer

Contributions, no. Deductibility, maybe. Just to be clear, the contribs are also deductible however and the max limits are higher. If there's an employer match, that's even better. Chin up, a 401k is rarely a bad thing.

Does 401K limit my IRA ?

Join the Discussion

Didn't find your answer?