2013 IRA Question

[Frugaltravelerdc]

Hi all,

Happy New Year! I'm hoping to get clarity on our IRA dilemma.

Here's our situation:
In 2013, DH joined a startup that doesn't offer a 401k plan. I have a 401k at work that I maxed out. (17.5k)

We don't have W2s in hand yet, but I suspect our combined AGI for 2013 will be ~200k.

Now for my questions:

1) Can we open a traditional IRA for DH for 2013?
2) If yes, can we deduct it on our taxes or are we above the income threshold? (married, filing jointly)
3) Assuming we cannot deduct a traditional IRA for DH on our taxes, can we open a Roth IRA for DH instead?
4) I read somewhere that we cannot open a Roth if we are above the income limit. Is that true?

I've been reading up on IRAs and keep getting confused every time. This is the first year we have faced this situation since we both used to work for companies with regular 401ks all the time.

Secondary question:
My company says they have something called a "roth401k" also. No idea what that means. Can I contribute to it?

thanks as always! You guys are great.
Happy new year!

 

[RE2Boys]

1. Yes, he can open a traditional IRA
2. If at any time during 2013 he worked for a company that offered a retirement plan (pension, 401k), then he is limited by an income test from deducting the IRA contributions. If your marrried filing joint AGI is over $112,000, no deduction allowed. If he at no time in 2013 under a retirement plan, then his contributions are fully deductible ($5500 plus $1000 if over 50)
3. Roth IRA contributions only allowed if AGI under $188,000 married filing joint. There is a phase out range from $178K to 188K

 

[panacea]

A backdoor Roth IRA may be a good option if he doesn't have any other IRAs. This is where you contribute to a Traditional IRA and then immediately convert it to a Roth.

Yes, anyone can contribute to a Roth 401k - no income limit on that. However, might not be the best idea if you're in a high tax bracket.

 

[Frugaltravelerdc]

Thank you both! Just learned that his company started offering a 401k plan last year (DH totally forgot about it). Given this information, we can still contribute to a traditional IRA, correct? Except that we can't deduct it on our taxes. So, effectively , we have a traditional IRA that we paid for with 'after tax dollars' (like a Roth), but can only withdraw from after 59 and half?

We looked at his 401k plan hoping to enroll - the lowest cost fund has a 2% expense ratio. Total ripoff. And there's no company match. So we are thinking of not contributing to the 401k.

Another question: given our AGIs, can we do a back door Roth? Anything I should be concerned about?

Thanks again !!