Can I now contribute to a tax-deductible IRA if I lost my job, where I had contributed to a 401k in that same year?
Also, my wife is employed and contributes to a 401k. My age is 57.
Your participation in the 401(k) plan for that year makes you an active participant and therefore by IRS rules, you may not be eligible to claim a deduction for a “Traditional IRA” contribution depending on your compensation level. Once you become an active participant, you unfortunately retain that status for the year.
The income limitations change from year to year and your wife’s active participation status is also important. The IRA contribution would be deductible if both husband and wife were active participants who elect to file taxes jointly, and make under $98K in 2016.
It depends on your income.
1) As an employee with a 401k at work in 2017, the maximum household income for a full deduction is $99,000 if you are filing your taxes jointly. You can get a partial deduction up to $119,000.
2) If your income is more than that, you can invest in a Roth IRA. The limit for this type of account is $186,000.
3) Going forward, you can only make contributions if you have earned income. However, your wife can make a contribution for you.
I hope this helps.
It sounds like you were employed and contributing to a 401(k) and your wife contributes to a 401(k) as well. Now you've lost your job and you want to know whether you can contribute to a Traditional IRA. If I have that right, the answer is yes. You can contribute up to $5,500 into an IRA and reduce your income. Your wife can also contribute to an IRA up to $5,500 even though she contributes to a 401(k). That could help if you were further trying to reduce your income.
The simple answer is that it depends upon your adjusted gross income earned in the year that you want to contribute to both as well as your marital filing status. If you maxed out your 401k contribution at $18,000, plus your over 50 catch-up contribution of $6,000 with gross earnings of $200+, your IRA contribution would still be permitted but it would not be tax deductible, for instance. According to the IRS guidelines for 2017, if you are married and filing jointly and you adjusted gross income is $119,000 or more then the IRA contribution would not be deductible. At different AGI, the contribution could provide a full deduction or a partial deduction.
You can contribute to a traditional IRA for yourself and your wife, 6500 for each of you if you are both over age 60, for a total of 13 thousand dollars. However, there is probably not much advantage in doing so if you lost your job since you are already in a low tax bracket. It is better to put 6500 into a Roth IRA for each of you for 2017. That way you will end up compounding your gains much better through time because there are no taxes due upon withdrawal. Be sure to stay conservative since we have probably begun the third severe bear market since 2000.
Also consider putting the maximum of 8750 into HSA accounts for yourself and your wife. Those are tax-deductible going in and have zero taxes coming out as long as you don't withdraw your funds until you are at least 65.