401k/IRA/Roth limits?

[Bimmerbill]

I know the IRS limits my 401K contributions to $15K this year.

But, does that include a Roth contribution? Or a regular IRA contribution?

Could I do $15K, $4K Roth, $4K regular IRA? (not that I could afford it...).

Thanks!

[maddythebeagle]

15k in 401k and 4000 to a ira (you can chop up the ira as a traditional or roth). so a grand total of 19k unless you are old enough to do a catch up. I think that is at 50...

[Texas Proud]

Quote:

Originally Posted by Maddy the Turbo Beagle 15k in 401k and 4000 to a ira (you can chop up the ira as a traditional or roth). so a grand total of 19k unless you are old enough to do a catch up. I think that is at 50...

That is the YEAR you turn 50... it happens to me next year and I will start the catch up early

[MasterBlaster]

One or the other on the IRAs (Roth or Regular)

[Bimmerbill]

Cool, thanks!

[maddythebeagle]

Quote:

One or the other on the IRAs (Roth or Regular)

I am pretty sure that you can do any combination of roth or traditional...i.e. you can do 1000 in roth and 3000 in traditional...just so it adds up to 4000. More people might look at it now since more are eligible for tax deductibility.

[eridanus]

Quote:

Originally Posted by Maddy the Turbo Beagle I am pretty sure that you can do any combination of roth or traditional...i.e. you can do 1000 in roth and 3000 in traditional...just so it adds up to 4000. More people might look at it now since more are eligible for tax deductibility.

Yep, you can split it. Watch out for income limits though. Traditional is much lower than Roth.

http://www.irs.gov/taxtopics/tc451.html

"If you, your spouse, or both of you are covered by a qualified retirement plan, your IRA deduction may be reduced or eliminated, depending on the amount of your Modified Adjusted Gross Income and your filing status."

http://www.irs.gov/publications/p590/ch02.html#d0e8975

"Roth IRAs and traditional IRAs. If contributions are made to both Roth IRAs and traditional IRAs established for your benefit, your contribution limit for Roth IRAs generally is the same as your limit would be if contributions were made only to Roth IRAs, but then reduced by all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs.

This means that your contribution limit is the lesser of:

*

$4,000 ($4,500 if you are age 50 or older; for 2006, $4,000 or $5,000, if you are age 50 or older) minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs, or
*

Your taxable compensation minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs."

[Bimmerbill]

So, in order for my wife to contribute to a Roth or regular IRA, she needs her own earned income?

[Silhan]

Quote:

Originally Posted by Bimmerbill So, in order for my wife to contribute to a Roth or regular IRA, she needs her own earned income?*

No, I believe she can contribute to an IRA using your earned income as long as you file your tax return jointly.

See the following links for more detail:

http://www.smartmoney.com/retirement...?story=spousal
http://www.fairmark.com/rothira/spousal.htm

[Martha]

If only one spouse is covered by a 401(k), then then the other spouse can have a traditional IRA. Full deductibility for AGI less than $150,000; partial deductibility for AGI of $150,000-$160,000. (If married filing jointly) If you are looking at a ROTH, the AGI limitations are the same.

For 2006 and 2007 , IRA max for an individual is $4000, plus an extra $1000 if over 50.

The applicable IRS publication: http://www.irs.gov/publications/p590/

[Dreamer]

Cool! I thought that I would have to get a part-time job next year in order to keep funding my Roth. My spouse and I have always worked so I never paid attention to the non-working spouse IRA. That is great to know. You really can find out so much info on this site. I love it!

[scrubradio]

OK, let me get this striaght in my head

I can contribute to my 401k, an IRA and a RothIRA at the
same time and recieve the tax benefits on the 401k and
regular IRA as long as I don't make to high of a salary?

I read this to mean that:

1. I can have some cash socked away in a 401k that will be
available for withdrawl without penalty at age 55.

2. I can have cash in a traditional IRA that I can draw SEPP
disbursement on atleast 5 years before age 59 1/2 without
penalty.

3. I can have cash in a RothIRA that I can withdrawl the
principal out without penalty anytime and withdrawl any
of the funds tax free after age 59 1/2.

4. As long as my adjusted gross income is below $44,000
(trying to remember amount I read for single) I can still
deduct both 401k and IRA contributions for tax purposes.

5. I can max out my 401k contributions, but have to decide
how to dice up the 4k/year for the additional IRA and RothIRA
to achieve the result I desire.

I have to be wrong!* This seems like a sweet deal.* To be
able to take advantage of the benefits of each type of
retirement account to avoid penalties seems like it could
only happen in a dream.

OK, this is where you take over and correct my oversights
and set me straight

[LOL!]

6. You can invest after-tax money in a regular account in a tax-managed way. There are no limits to such an account.

7. If your spouse works and can contribute to a 401(k) plan, then they may be able to really sock away the money. For example, suppose spouse reaches age 50 this year and makes $25K. They could put $20K into a 401(k) and use the the remaining $5K for FICA, medicare, taxes and fun money.

[Texas Proud]

Quote:

Originally Posted by LOL! 6. You can invest after-tax money in a regular account in a tax-managed way. There are no limits to such an account. 7. If your spouse works and can contribute to a 401(k) plan, then they may be able to really sock away the money. For example, suppose spouse reaches age 50 this year and makes $25K. They could put $20K into a 401(k) and use the the remaining $5K for FICA, medicare, taxes and fun money.

Sorry LOL.. but 7 is wrong for most people... my company will not allow you to put more than 15% in your 401(k)... I am not sure how the makeup amount goes against the percentage..

[LOL!]

Quote:

Originally Posted by Texas Proud Sorry LOL.. but 7 is wrong for most people... my company will not allow you to put more than 15% in your 401(k)...* I am not sure how the makeup amount goes against the percentage..

I would've agreed with you a few years ago, but many 401(k) plans have changed so that the percentage allowed is substantial.* * Nowadays (but not 5 years ago), both my plan and my spouse's plan allow for all your net paycheck to go into the 401(k) plan.

And if one's plan limits the percentage, then lobby to change that restriction.

[Texas Proud]

Quote:

Originally Posted by LOL! I would've agreed with you a few years ago, but many 401(k) plans have changed so that the percentage allowed is substantial. Nowadays (but not 5 years ago), both my plan and my spouse's plan allow for all your net paycheck to go into the 401(k) plan. And if one's plan limits the percentage, then lobby to change that restriction.

Wasn't there an IRS limit I know it used to be 20% of gross or 25% of net or something like that...

As for Mega.. I am hoping that they do the ROTH 401... I do not care about the percentage..

[SecondCor521]

Quote:

Originally Posted by scrubradio OK, let me get this striaght in my head I can contribute to my 401k, an IRA and a RothIRA at the same time and recieve the tax benefits on the 401k and regular IRA as long as I don't make to high of a salary? I read this to mean that: 1. I can have some cash socked away in a 401k that will be available for withdrawl without penalty at age 55. 2. I can have cash in a traditional IRA that I can draw SEPP disbursement on atleast 5 years before age 59 1/2 without penalty. 3. I can have cash in a RothIRA that I can withdrawl the principal out without penalty anytime and withdrawl any of the funds tax free after age 59 1/2. 4. As long as my adjusted gross income is below $44,000 (trying to remember amount I read for single) I can still deduct both 401k and IRA contributions for tax purposes. 5. I can max out my 401k contributions, but have to decide how to dice up the 4k/year for the additional IRA and RothIRA to achieve the result I desire. I have to be wrong! This seems like a sweet deal. To be able to take advantage of the benefits of each type of retirement account to avoid penalties seems like it could only happen in a dream. OK, this is where you take over and correct my oversights and set me straight

I think you're right more or less.

A few comments:

1. You can roll your 401(k) into a traditional or a Roth IRA and then use the various advantages/rules of IRA's on that money. But note that if you roll 401(k) into a Roth you'll pay taxes (and possibly penalties) on the amount withdrawn. Also, the withdrawal from your 401(k) after 55 only happens if you leave your employer in or after the year you turn 55. If you leave before then I think it's 59 1/2, but doublecheck that.

2. Your withdrawals have to follow the SEPP / 72(t) rules, but basically you can start anytime as long as the withdrawals last for 5 years or until 59 1/2, whichever is longer.

3. Yup.

4. You can't deduct Roth IRA contributions, but you knew that.

5. Yes. Note that the limits change every year and in general they go up -- both the income limits for contribution and deductibility, and the amount you can contribute. In particular, there are catchup provisions so that people past a certain age -- 50, I think -- can contribute even more -- like $5,000 this year. Again, check the IRS for the exact limits.

2Cor521

[scrubradio]

Quote:

Originally Posted by SecondCor521 Also, the withdrawal from your 401(k) after 55 only happens if you leave your employer in or after the year you turn 55.* If you leave before then I think it's 59 1/2, but doublecheck that.

Well that puts a damper on one idea I had. Have to adjust the
idea to fit the rules of the game.

Thanks for your input.