Contribute to BOTH Your 401(k) and IRA in 2013

Tuesday, November 26, 2013

By Joe Cicchinelli, IRA Technical Expert

Follow Me on Twitter: @JoeCiccEdSlott

There’s a common belief that if you have a 401(k) plan where you work and you contribute to it, you’re not allowed to also contribute to your IRA for the same year. But that’s not true; you’re allowed to contribute to both.

As far as IRA or Roth IRA contributions go, for 2013, the maximum that you can contribute is $5,500 if you’re under age 50 or $6,500 if you’re age 50 or older this year. In fact, you can contribute to both an IRA and a Roth IRA for the year, but the total limit is $5,550 (or $6,500). For example, let’s assume you’re age 60, working this year, and eligible to contribute the full $6,500 to a Roth IRA. If you decide to only contribute $4,000 to your Roth IRA, you could choose to contribute the remaining $2,500 to your IRA, bringing the total to $6,500.

Let’s also assume you have a 401(k) plan where you work. The maximum 401(k) contributions (also known as salary deferrals) you can make for 2013 are $17,500. If you are age 50 or older and your plan allows, you can also make catch-up contributions of an additional $5,500, making your total 401(k) contributions $23,000. Oftentimes, 401(k) plans have some plan-based restrictions on salary deferrals that might reduce the maximum dollar amount you can actually save. For example, your plan might need to limit your salary deferrals to pass certain IRS nondiscrimination tests.

Contributing to a 401(k) in no way limits your ability to make contributions to an IRA or Roth IRA. Roth IRA eligibility is only limited by your modified adjusted gross income and there are no income limits for contributing to a traditional IRA. The biggest limit really is how much money you can afford to contribute. If you can afford to contribute the maximum to both your 401(k) and IRA for 2013, then you can contribute a total of $23,000 ($5,500 + 17,500) if you’re under age 50 or $29,500 ($6,500 + $23,000) if your age 50 or older.
 

Receive Ed Slott and Company Articles Straight to Your Inbox!
Enter your email address:

Delivered by FeedBurner

 

Posted in: , , ,

Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to [email protected] for approval.

For white papers/other outflow pieces:

Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:

Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:

Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at [email protected] or (516) 536-8282 with any questions.