A friend of mine, 58 years and about 50K per year income wants to know the maximum contribution he is allowed for his work 401k and to his IRA, also if combined the 401k and IRA are also limited. His employer does not provide a retirement plan other than the 401k. It is relevent his wife has a ritirement plan with her emplyer, a profit sharing all emploer contributed, her income also about 50-60K.
Thanks.
The rule is that a Traditional IRA contribution has no affect on the contributions to a 401(k) plan. But, be sure all other tests are met in your case with your wife. But if more than one company/business is involved the rules are different.
Because age 50 and above:
22,000 for 401k. 6,000 for IRA.The IRA contribution may be partially deductible. Because both spouses are covered by a plan at work, the phaseout is between 89k and
109k. That is, if the combined income is 89k you get the full 6k deduction, and it decreases linearly, and if your joint income above 109k then no deduction. You can still contribute to the IRA, but fill out form 8606. But then might as well contribute to a Roth.
He can contribute up to $22,000 to the 401(k) for 2010. Both spouses can contribute $6,000 each to their IRA. Unless they have significant non-W-2 income, a Roth IRA would be the best bet, because they are likely to be in the 15% bracket. But also unless they are very frugal people, or have other income, it would be quite a stretch to put away $34,000 on income of $110,000.
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