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Level 2

Can I open IRA while I have Employee sponsored 401K

Hello Experts,

 

I participate in my employee sponsored 401K and my AGI exceeds the limits specified for Roth IRA.

Can I open an Traditional IRA account though two conditions are true:

- Participate in 401K

-AGI >= limits.

 

I understand that I may not be able to take deductions. Please help.

1 Best answer

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Level 15

Can I open IRA while I have Employee sponsored 401K

Yes as long as you have taxable compensation (wage).  You can always make a non-deductible Traditional IRA contribution.  Note that the MAGI deduction limits are different than a Roth.

 

The maximum IRA contributions for 2019 is $6,000, or $7,000 if you’re age 50 or older by the end of the year; or your taxable compensation for the year which ever is less.

(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deducible part of the SE tax, but can include commissions, certain alimony and separate maintenance, and nontaxable combat pay ).

See IRS Pub 590A "What is compensation" for details:
https://www.irs.gov/publications/p590a#en_US_2018_publink1000230355

See this IRS link for Traditional IRA deduction limits when covered by a retirement plan at work.

https://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

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2 Replies
Highlighted
Level 15

Can I open IRA while I have Employee sponsored 401K

Yes as long as you have taxable compensation (wage).  You can always make a non-deductible Traditional IRA contribution.  Note that the MAGI deduction limits are different than a Roth.

 

The maximum IRA contributions for 2019 is $6,000, or $7,000 if you’re age 50 or older by the end of the year; or your taxable compensation for the year which ever is less.

(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deducible part of the SE tax, but can include commissions, certain alimony and separate maintenance, and nontaxable combat pay ).

See IRS Pub 590A "What is compensation" for details:
https://www.irs.gov/publications/p590a#en_US_2018_publink1000230355

See this IRS link for Traditional IRA deduction limits when covered by a retirement plan at work.

https://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

View solution in original post

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Level 2

Can I open IRA while I have Employee sponsored 401K

Thank you so much.  Appreciate it.

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