401k and IRA together?

[Retireby45ish]

This may be a silly question but there is a lot of conflicting info on the web so I figured I would ask here.

Can I contribute the max (19k) into my 401k and then also put money into an IRA (max 6k there) to grow tax free? I thought (was told years ago) once I maxed out the 401K that I couldn’t put money into an IRA.

Is it smart to do both if we can? If so I just missed some serious tax sheltering the last bunch of years.

Also, my wife didn’t work this year. Can I contribute to her IRA before year end? Do I have to set up a spouse IRA type?

We are both under 50.

I’d like to have more money in these tax sheltered accounts if possible and we can certainly afford to move more into them.

[targatom2019]

yes, I have contributed to 401k and IRA for over 24 years but with Roth IRA, think the income limit can't be over around 190K filed jointly or else you put it in Traditional IRA.

FYI, only Roth IRA growths tax free not Traditional IRA.

[SecondCor521]

Quote:

Originally Posted by Retireby45ish This may be a silly question but there is a lot of conflicting info on the web so I figured I would ask here. [1] Can I contribute the max (19k) into my 401k and then also put money into an IRA (max 6k there) to grow tax free? I thought (was told years ago) once I maxed out the 401K that I couldn’t put money into an IRA. [2] Is it smart to do both if we can? If so I just missed some serious tax sheltering the last bunch of years. Also, my wife didn’t work this year. [3] Can I contribute to her IRA before year end? [4] Do I have to set up a spouse IRA type? We are both under 50. I’d like to have more money in these tax sheltered accounts if possible and we can certainly afford to move more into them.

[Numbers added for reference.]

1. Yes, assuming you have enough earned income and not too much income. There are income limits which determine whether or not you may deduct a traditional IRA contribution. There is also an income limit above which you may not make a Roth IRA contribution.

Technically amounts put into a traditional IRA grow tax-deferred, meaning no taxes are due until you withdraw money. Contributions to a Roth IRA grow tax-deferred and can be withdrawn tax-free given certain basic requirements.

2. Generally, yes. Tax deferral is often a good thing. If you expect to be wealthier in retirement and have a very high income, it might be better *not* to defer. But often it is good to defer because you can often find a later tax year where you can realize the income and pay a lower rate than whatever you avoided paying now by deferring the income until later.

3. Yes. You can generally contribute to her IRA for this tax year (2019) any time before the tax filing deadline (generally April 15, 2020) as long as you have enough earned income between the two of you to cover your IRA contributions. So if you made $31K, you could put $19K in your 401(k), $6K in your IRA, and $6K in her IRA.

4. No. The IRA itself is not a spousal IRA, the contribution you make is a spousal IRA contribution to her regular IRA.

[Sunset]

OP - I think SecondCor521 answered it well, given the information provided.

Somewhat related, I suggest OP you open a ROTH in both your wife and yourself names. Get it where there are zero fees for account management so you pay nothing in fees. Stick $1.00 in each.
The reason is this starts the 5 clock on Roth ownership for you, which may be useful later on.

[Retireby45ish]

Thanks.

1. Seems like the income limits to deduct the IRA part are my issue. Earned Income this year is going to be north of $200k. And when she returns to W&rk next year we will make over $300k. So, it seems like the IRA is out (right?) because of the limits on income. Same with the Roth option. (From what I read).

Other numbers discussed not relevant because Of the issue above.

[target2019]

Quote:

Originally Posted by Retireby45ish Thanks. 1. Seems like the income limits to deduct the IRA part are my issue. Earned Income this year is going to be north of $200k. And when she returns to W&rk next year we will make over $300k. So, it seems like the IRA is out (right?) because of the limits on income. Same with the Roth option. (From what I read). Other numbers discussed not relevant because Of the issue above.

A deductible IRA is off the table.

https://www.irs.gov/retirement-plans...duction-limits

[The Cosmic Avenger]

Quote:

Originally Posted by Retireby45ish Thanks. 1. Seems like the income limits to deduct the IRA part are my issue. Earned Income this year is going to be north of $200k. And when she returns to W&rk next year we will make over $300k. So, it seems like the IRA is out (right?) because of the limits on income. Same with the Roth option. (From what I read). Other numbers discussed not relevant because Of the issue above.

You could put post-tax income into a new tIRA and then convert the entire balance to a Roth IRA. That's what we've been doing, since our income precludes us contributing the max to a Roth. I put it in a money market, to minimize the taxable gain, then convert as soon as Fidelity will let me (usually about a week later, I have no idea why it isn't sooner).

[kaneohe]

Quote:

Originally Posted by Retireby45ish Thanks. 1. ........................... So, it seems like the IRA is out (right?) because of the limits on income. ....................................

unless you want to explore the backdoor Roth https://www.bogleheads.org/wiki/Backdoor_Roth

Be sure to read and understand the whole process, esp. the Cautions section.

[SecondCor521]

Quote:

Originally Posted by The Cosmic Avenger You could put post-tax income into a new tIRA and then convert the entire balance to a Roth IRA. That's what we've been doing, since our income precludes us contributing the max to a Roth. I put it in a money market, to minimize the taxable gain, then convert as soon as Fidelity will let me (usually about a week later, I have no idea why it isn't sooner).

Yeah, this ^.

[mickeyd]

I once worked at a PT job (after retirement) and found out that everyone of my fellow employees were there for the same reason: To fund their Roth IRA. After earning $7500 (Roth IRA max), we quit.