I've just left my current job where I've already contributed the max ($19,500) to my 401k plan for 2021. My new employer is a small company and does not have a 401k plan. For 2021, can I also contribute $6,000 to an IRA or because I maxed out my 401k for this year already, am I not allowed to also do the IRA? I am 35 years old.
Hi Danarand1,
First, I just want to say congratulations on the new job!!
It is possible to be able to contribute to both a 401k plan and an IRA in the same year. However, your individual circumstances may limit or disallow any deduction for the IRA contribution.
Since you had an employer with a 401k plan during 2021, you must abide by the 2021 IRA deductions limits with regarding to the modified AGI since you (or spouse) were covered by a retirement plan at work during the same tax year.
In order to receive the full deduction for IRA contribution in 2021 while having a retirement plan at work, your MAGI must be $66,000 or less if you file single or head of household. There is a partial deduction up to $76,000. At $76,000 you will receive no deduction for the IRA contribution. In this circumstance, Married filing jointly filers get a full deduction with a $105,000 MAGI and is completely phased out at $125,000.
You can read more about the income limitations of IRA contributions when you have a retirement plan at work on the IRS website at: https://www.irs.gov/retirement-plans/2021-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work
For even more information, please see publication 590-A. At this time, the link is for 2020 and has not been updated with the 2021 limitations referenced above. https://www.irs.gov/publications/p590a
Hello @Danarand1 !
Thanks for the question.
The answer is yes AND possibly no.
You are definitely allowed to contribute the $6,000 into a traditional IRA (or Roth IRA, if you fall within the income limits), but because one of your employers in 2021 did have a retirement plan available for you, you may not be able to take the deduction, or the full deduction. Here is an IRS link that explains the income limits for claiming a deduction on your IRA contributions for 2021 when you were covered by a retirement plan at work. *Note, there are slightly different rules for each spouse if you are married and one spouse is covered, but the other isn't.
Hopefully that answers your question and gives you some of the tools you need to make your retirement saving choices!