Can I contribute the max after tax of $7K to my traditional Rollover IRA even though I also contribute the max std and catchup to my employers 401K?

[mcamp60]

Also, if i can contribute the $7K i realize would not be deducible as my income exceeds the limits.

[dmertz]

The contribution limits for 2023 are $6,500 if under age 50 in 2023, $7,500 if over age 50.  The contribution limits for 2024 are $7,000 if under age 50 in 2024, $8,000 if over age 50. 

If your W-2 for the year of the contribution shows in box 1 at least as much as you contribute for the year, you have sufficient compensation to support the contribution.  Being a participant in an employer plan only potentially affects the deductibility of the contribution, not eligibility to make the contribution.

[Opus 17]

Yes, you can contribute to a traditional IRA up to the annual limit even if you participate in a workplace plan, the rules and contribution limits are separate.  However, depending on your income and marital/filing status, you might not be able to take a tax deduction for the contribution.  See here.

https://www.irs.gov/retirement-plans/ira-deduction-limits

If you make a non-deductible contribution to a traditional IRA, that will create a "basis" in the IRA, this is an amount of already-taxed money.  Your tax return will include a form 8606, and you need to keep a copy of this form for your entire life (it's an exception to the rule that you can throw away most tax papers after 3 or 7 years).  If you make more non-deductible contributions in the future, you will use the prior form 8606 to prepare your tax return which will include a new form 8606 that tracks your total non-deductible basis. When you start withdrawing from the IRA, the fact that part of the balance was already taxed means that part of the withdrawal will be tax-free, as long as you have all your form(s) 8606 to prove it.  

[mcamp60]

ok...let me play back what i just heard...in my own less experienced words. BTW, thank you for your input.

I am single, over 50, with an income over 83K...i can:

•  I did contribute to my Employers 401K in 2023 the max $22.5K ($23K 2024) plus $7.5K catchup (same 2024) AND,
• I did contribute to a Traditional Rollover IRA (Opened in 2023) - I can, if i choose to,  also contribute $7.5K to the IRA for 2023 if i do it before the deadline in april this year.
• Because of my age, income, and i am in a 401K - i CANNOT deduct the IRA contribution. Additionally, i will need to complete a form 8606 for my $7.5K after tax contribution to the IRA and I will need to regenerate that form each year to include any additional contributions (if i make them in future years).

Final thought...in lieu of the contributing to my traditional IRA, i would rather open a Roth IRA but i believe i canNOT contribute to that as my i have reached the contribution AGI limits for single >= 153K...does that sound right?

[Opus 17]

@mcamp60 

I'm not sure what this means.

"I did contribute to a Traditional Rollover IRA (Opened in 2023) - I can, if i choose to,  also contribute $7.5K to the IRA for 2023 if i do it before the deadline in april this year."

There's nothing special about a rollover IRA--while you might have opened it by rolling over money from some previous account, once it is opened, it is treated the same as any other IRA.

You said you contributed, and you want to contribute more.  Any money that was rolled over into an IRA is not a contribution, and does not count toward your $7500 contribution limit for 2023.  However, prior contributions do definitely count.  Your total contribution limit for 2023 is $7500, and that includes both amounts contributed before 12/31/23, and amounts contributed between 1/1/24 and 4/15/24 as long as those contributions are designated as 2023 contributions.  

How much did you contribute so far to the IRA for 2023, not counting the rollover?

You can't contribute to a Roth IRA in your position.  But you might be in a position to consider a "backdoor" Roth contribution. This is a complicated topic that will take this conversation in a completely different direction.  To even begin to think about this, we need to know your current total combined balance in all the IRA accounts in your name (but not counting workplace accounts like 401k or 403b plans).  

[mcamp60]

sorry i fumbled my sentence...i meant to say "I did contribute to a Traditional Rollover IRA (Opened in 2023) - I can, if i choose to,  also contribute $7.5K to the IRA for 2023 if i do it before the deadline in april this year."..

While i am interested in the backdoor Roth...i will take your advice and not pursue here and now. I believe my question was more than answered about IRA contributionsthank you so much, everyone, for helping me.

[Opus 17]

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@mcamp60 wrote:

sorry i fumbled my sentence...i meant to say "I did contribute to a Traditional Rollover IRA (Opened in 2023) - I can, if i choose to,  also contribute $7.5K to the IRA for 2023 if i do it before the deadline in april this year."..

While i am interested in the backdoor Roth...i will take your advice and not pursue here and now. I believe my question was more than answered about IRA contributionsthank you so much, everyone, for helping me.

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Yes, you can contribute up to $7500 designated for 2023 (just make sure to make the designation with the bank or broker so they don't count it for 2024 by mistake).

You can contribute a further $8000 for 2024 (the IRS raised the limit).

Turbotax will make the form 8606 for you, keep a copy with your other important papers.

How easily you can do a backdoor Roth depends on your total combined balance in all traditional IRAs.  If that balance is more than zero, then the backdoor Roth doesn't really work the way its intended, as you must also convert a portion of the pre-tax balance to a Roth and that is a taxable event.  If you just have one small IRA, the tax bite might not be so bad, but if your IRA balance is large, you might have to do it in several steps over time, or just keep making after-tax contributions to the traditional IRA and tracking the basis.