Total Contributions allowed for SIMPLE and traditional IRA’s
Can a person contribute the maximum to her IRA ($5000 since she’s over 50) [b]and[/b] contribute the maximum to her SIMPLE IRA (which I believe is $12,500) each year?
She is still working as is her husband so there is plenty of earned income.
Permalink Submitted by Alan Spross on Thu, 2007-10-18 00:38
The 2007 SIMPLE IRA max is 10,500 plus 2,500 catchup = $13,000. She can contribute the SIMPLE IRA max plus a traditional IRA contribution. However, since the SIMPLE is considered an employer retirement plan, her deduction of the TIRA contribution is limited by modified AGI. If she cannot deduct the TIRA contribution, the next option would be for a Roth contribution. If modified AGI is too high for a Roth, then a non deductible TIRA contribution can be made as the least desirable option.
Note: If she also works for another employer with a salary reduction plan, the basic SIMPLE IRA contribution counts against the total limit of 15,500. for salary reductions.
Permalink Submitted by margy lesher on Fri, 2007-10-19 20:10
I have a self-employed client who has for several years put the max into her Simple (currently $13000 salary deferral – she’s over 50) plus the 3% “employer contribution”, and also the max into her Roth ($5000). Her AGI is around $30000.
Now I’ve been told that she shouldn’t have been doing a Roth because she’s over the limit since you have to add in the Simple $ when figuring the max for the Roth. Is this really true?
Permalink Submitted by Alan Spross on Sat, 2007-10-20 00:50
No, that is incorrect. There is no problem with what she has been doing.