Can You contribute to an IRA and a 401K?

You can contribute to an IRA and a 401(K) because a 401(K) is an employer sponsored plan and an IRA (Individual Retirement Account) can be individually held. If you have an employer plan such as 401(K), 403b or 457 then the tax free amount that you can contribute to other retirement plans are limited. You can choose one of the Roth plans or a traditional plan for your other retirement fund. For 2010 tax year and 2011 tax year you can contribute a maximum of $5,000 to an IRA whether it is traditional or Roth. If you are older than 50 you can contribute $6,000 maximum. If you have two funds you must split the money between the two, not to exceed the limits set by the Internal Revenue Service (IRS).

The Roth IRA has limits and you can contribute to an IRA and a 401(K) but the IRS has income limits on the amount. For 2011 you must make less than $107,000 to fully fund your Roth IRA. If you are in the married filing joint status then you can earn up to $169,000. The income cap is $122,000 and $179,000, respectively, and the percentage contribution falls to zero. You will be allowed a pro-rated contribution percentage up to that income cap. All Roth IRA retirement funding is made with earnings that have been taxed.

You can contribute to an IRA and a 401(K) but there is a cap on the income you can earn. Each year the IRS sets the limit for income and sets the tax deduction rate for traditional retirement accounts if you have one that is employer sponsored. If you are single the income cap is $56,000 and you can make a percentage contribution up to an income limit of $66,000. If you are in the filing status of married filing jointly your earnings cap is $90,000 and for partial funding you can make no more than $110,000.

There is a deadline for making the contributions to any retirement fund. You have up until the date you file the return for the tax year to make a contribution. For example: You will have until April 18, 2011 to make a contribution if you file your return by the deadline set for the 2010 tax year. You can file an extension until October 17, 2011 for the 2010 tax year. If you are making a payment in 2011 that you want credited to the 2010 tax year be sure to let the plan administrator know.

If you are making a contribution to a traditional IRA you will not have income caps or limits. If you make more than the Roth IRA limits then you can invest in a traditional fund. You will have to use money that has been taxed, but the investment funds will not have been taxed and you will pay taxes on money drawn out that is from the investment earnings of the account. Effective 2010, there are no income restrictions on converting from one IRA to another. You can contribute to an IIRA and a 401(K) but be sure to seek the advice of your tax preparer if you do not understand all the IRS rules regarding your type of retirement account(s).

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