401K & IRA Deductions

[Michael Palero]

If you have reached the maximum allowable deduction limit for your 401K, can you open and contribute to a IRA for additional deductions?

Correct me if I'm wrong, but I understood the 2010 deduction limit for 401Ks to be $5,500

[Marshall Grice]

the 401k limit is $16500, and you can deduct upto $5000 for an IRA depending on how much you make a year. if you make more then 65k AGI i think you're SOL.

Funny enough I was just researching this exact same question on wed of this week.

[Ron Horn]

before we had kids we researched what to do with all of the extra money also.
that was before we had kids...

[Craig Naylor]

There are litmus tests for deductible contributions to an IRA. However you can make non-deductible contributions to a standard IRA. There are litmus tests to contributions to a Roth IRA, though for some reason I seam to recall were in a one year gap (suspension) this year? You may wish to check that out too.

Back to the 401k, there are special rules your employer can write into contracts for people who will exceed standard 401k limits called something like "rules for highly compensated employees." In publicly traded companies, you'll often find a section in the annual report talking about this.

[Michael Palero]

There are litmus tests for deductible contributions to an IRA. However you can make non-deductible contributions to a standard IRA. There are litmus tests to contributions to a Roth IRA, though for some reason I seam to recall were in a one year gap (suspension) this year? You may wish to check that out too.

Back to the 401k, there are special rules your employer can write into contracts for people who will exceed standard 401k limits called something like "rules for highly compensated employees." In publicly traded companies, you'll often find a section in the annual report talking about this.

So I've got a 401K.
Say I contribute $5,500 for the maximum deductible in 2010.
Can I open up an IRA and also contribute $5,500 for the maximum deductible for a total of 11 off my AGI?

[Craig Naylor]

Here would be my personal choices: (obviously different financial issues might alter, such as my employer who is one of the S&P500 listed companies who does not offer all of it's employees access to the 401k plan)

1.) 401K - up to maximum employer match no matter what the investment options are.
2.) Continue with 401k - if the investment options are good up to the max contribution of $16500 as Martial Grice pointed out above. (Still don't know where your getting the 5.5k number from)
3.) Max Roth contribution
4.) a) Max IRA deductable contribution OR b) Max non-deductable IRA contribution.

If you still have excess money burning a hole in your pocket that you want to put away for retirement tax defered
5.) An Annuity

However I'd probably be looking for investment Real Estate before I went on to #5.

[Marshall Grice]

http://www.irs.gov/taxtopics/tc451.html" onclick="window.open(this.href);return false;

[Craig Naylor]

and 401k's specifically:
http://www.irs.gov/retirement/article/0 ... tributions" onclick="window.open(this.href);return false;

Contribution Limits
Total employer and employee contributions to all of an employer’s plans are subject to an overall annual limitation - the lesser of:

*100 percent of the employee’s compensation, or
*$49,000 in 2009 and 2010.

The amount employees can contribute under a traditional, safe harbor or automatic enrollment 401(k) plan is limited to $16,500 for 2009 and 2010.

Traditional, safe harbor and automatic enrollment 401(k) plans can allow additional catch-up contributions in the amount of $5,500 for 2009 and 2010 for employees aged 50 and over.

(italic was my addition)

[Bob Beamesderfer]

Search my former colleague's columns:

http://articles.moneycentral.msn.com/Co ... eston.aspx" onclick="window.open(this.href);return false;

[Michael Palero]

Search my former colleague's columns:

http://articles.moneycentral.msn.com/Co ... eston.aspx" onclick="window.open(this.href);return false;

Uh Bob, it says "Lose your house, then get sued.."

[Bob Beamesderfer]

Search my former colleague's columns:

http://articles.moneycentral.msn.com/Co ... eston.aspx" onclick="window.open(this.href);return false;

Uh Bob, it says "Lose your house, then get sued.."

S-E-A-R-C-H, as in you use the Search function on that site. That's just the current column.