Even if you participate in a 401(k) plan at work, you can still contribute to a Roth IRA and/or traditional IRA, as long as you meet the IRA's eligibility requirements. You might not be able to take a tax deduction for your traditional IRA contributions if you also have a 401(k), but that will not affect the amount you are allowed to contribute—up to $6,000, or $7,000 with a catch-up contribution for those 50 and over, for 2021.

It usually makes sense to contribute enough to your 401(k) account to get the maximum matching contribution from your employer. But after that, adding an IRA to your retirement mix can provide you with more investment options and possibly lower fees than your 401(k) charges. A Roth IRA will also give you a source of tax-free income in retirement.

Here are the rules you'll need to know.

Key Takeaways

  • Having a 401(k) account at work doesn't affect your eligibility to make IRA contributions.
  • Whether your traditional IRA contributions are deductible, however, will depend on your income.
  • Your income will also affect how much money, if any, you can put into a Roth IRA.

IRA Eligibility and Contribution Limits

The contribution limits for both traditional and Roth IRAs are $6,000 per year, plus a $1,000 catch-up contribution for those 50 and older, for both tax years 2020 and 2021. You can split your contributions between the two types, but your total contribution is still limited to $6,000 or $7,000. Traditional and Roth IRAs also have some different rules regarding your contributions. 

For a Traditional IRA

Contributions to a traditional IRA are often tax-deductible. But if you are covered by a 401(k) or any other employer-sponsored plan, your modified adjusted gross income (MAGI) will determine how much of your contribution you can deduct—if any. The following table breaks it down:

Deductibility of IRA Contributions If You Also Have an Employer Plan (2021)

Tax-filing status

Income to deduct full contribution

Income for partial  deduction

Above this income, no deduction
Contribution limit

Less than $66,000

$66,000 to $76,000

More than $76,000
$6,000 + $1,000 more if you're 50+
Married, with your own 401(k)

Less than $105,000

$105,000 to $125,000

More than $125,000
$6,000 each + $1,000 more if you're 50+
Married, spouse has a  401(k) 

Less than $198,000

$198,000 to $208,000

More than 
$6,000 each + $1,000 more if you're 50+ 
Married with own 401(k), filing own return


$0 to $10,000

More than $10,000
$6,000 + $1,000 more if you're 50+

IRS Publication 590-A explains how to calculate your deductible contribution if either you or your spouse is covered by a 401(k) plan.

Even if you don't qualify for a deductible contribution, you can still benefit from the tax-deferred investment growth in an IRA by making a nondeductible contribution. If you do that, you will need to file IRS Form 8606 with your tax return for the year.

For a Roth IRA

With Roth IRAs, which provide no upfront tax benefit, it doesn't matter whether you have an employer plan. How much you can contribute, or whether you can contribute at all, is based on your tax-filing status and your income for the year.

This table shows the current income thresholds:

Roth IRA Contributions (2021)

Tax-filing status

Income for full contribution

Income for partial  contribution

No contribution allowed

Contribution limit


Less than $125,000

$125,000 to $140,000

More than $140,000

$6,000 + $1,000 more if you're 50+

Married, filing jointly

Less than $198,000

$198,000 to $208,000

More than $208,000

$6,000 each + $1,000 more if you're 50+

Married, filing separately


$0 to $10,000

More than $10,000

$6,000 + $1,000 more if you're 50+

Spousal IRAs

To contribute to an IRA, you must generally have earned income. However, there's an exception for married couples where only one spouse works outside the home. That's a spousal IRA. It allows the employed spouse to contribute to an IRA of a nonworking spouse and as much as double the family's retirement savings. You can open a spousal IRA as either a traditional or a Roth account. 

What if You Contribute Too Much?

If you discover that you have contributed more to your IRA than you're allowed, you'll want to withdraw the amount of your overcontribution, and fast. Failure to do so in a timely way could leave you liable for a 6% excise tax every year on the amount that exceeds the limit.

The penalty is waived if you withdraw the money before you file your taxes for the year in which the contribution was made. You will also need to calculate what your excess contributions earned while they were in the IRA and withdraw that amount from the account, as well.

The investment gain must also be included in your gross income for the year and taxed accordingly. What's more, if you are under 59½, you'll owe a 10% early withdrawal penalty on that amount.