Can I contribute to a traditional 401(k) and a Roth IRA?

I am currently contributing to a company sponsored 401(k). I contribute 8% (annual salary $60K), which comes out to $4,800 for the year. Can I also set up and contribute to a Roth IRA? If so, what amount can I contribute?

401(k), IRAs
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December 2016
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Your eligibility to contribute to an IRA (Traditional or Roth) is the same, regardless of whether or not you contribute to a company-sponsored retirement plan, like your 401(k).

The limit for IRA contributions is $5,500/year. If you are over the age of 50, you are eligible to contribute an additional $1,000 "catch-up" contribution, for a total of $6,500/year. This is the total you can contribute to all of your IRAs, Traditional and Roth. In other words, you cannot contribute $5,500 to a traditional IRA, AND $5,500 to a Roth IRA. You can, however, contribute up to the limit for your spouse, even if they do not work. This means that a married couple can contribute up to $11K/year ($12K if both are over 50) to their IRAs ($5,500/$6,000 for each).

There are some additional rules for being able to contribute to a Roth, as you must be below a certain income limit. If you are married filing jointly, your adjusted gross income (AGI) must be below $184K. For singles, your AGI must be below $117K. If your income is above these limits, you might still be able to contribute, but only a reduced amount (see https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2016).

Keep in mind that there is a "back door strategy" for contributing to a Roth IRA, even if your income exceeds the limits for being able to contribute directly to a Roth. However, you should consult with a financial professional to assess whether or not this strategy makes sense for you because it does have tax implications.

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