IRA/401k Question

[Dazarath]

Do 401k contributions affect one's eligibility for IRA contributions?

[MrMon]

Yes and no. This goes back awhile, so the rules might have changed, but I believe that if you have a 401k, you can still contribute to an IRA, but it is no longer tax deductable.

Feel free to correct me. Or just check the Turbo Tax site. They usually have good knowledge of the latest tax rules.

[squiffy]

I think it depends. See link to IRS site.

http://www.irs.gov/retirement/article/0,,id=111413,00.html#1

http://www.irs.gov/pub/irs-pdf/p590.pdf

http://www.fool.com/money/allaboutiras/allaboutiras09.htm

[Elaboration]

[ QUOTE ]
Do 401k contributions affect one's eligibility for IRA contributions?

[/ QUOTE ]

Yes. If you have a 401k plan, you can still contribute to an IRA, it just may not be deductible. A phase out begins at 50k of income and at 60k your deductible amount drops to zero. So, if you make less than 50k you can make a full deductible contribution, between 50k-60k the deductible portion is phased our proportionately and 60k and above equals zero deduction. Again, you can still contribute at >60k, but you only get the advantage of tax deferred growth and would probably be better off with a Roth IRA.

Hope that helps-

[Dazarath]

Thanks for the responses. To clarify things, I'm a student and I worked an internship during the summer. My earned income for the year totals ~8-9k. I made a Roth IRA contribution of 4k, but the company I worked for gave me a 401k plan as well. I was just wondering if I was allowed to put the full 4k into a Roth if I was putting 1k in the 401k.

[Vee Quiva]

The Roth IRA is different than a traditional IRA. The eligibility to contribute to a Roth has no relation to your 401k.

As long as you make less than $95,000 filing single or $150,000 filing joint, you are able to make a full $4000 contribution to a Roth.