Pension eligble and ability to fund a self directed IRA and claim deduction
Is it true that a state employee covered by a state pension and making over a certain amount cannot contribute to a deductible IRA? Does that hold true for ERIS and non-ERISA 403b’s alike?
Someone told me this today and referred me to this link. If so, using their school’s 403b would be the only way for them to save on a tax deferred basis.
http://www.pensionrights.org/publications/fact-sheet/traditional-iras
Permalink Submitted by Alan - IRA critic on Fri, 2017-02-17 16:53
Contributions to any 403b, 401k, SEP or SIMPLE IRA, or participation in a DB plan make an employee an “active participant” and subject to the income limits to deduct an IRA contribution. In addition, there are also income limits, although higher, if a spouse is an active participant even if the taxpayer is not. Note that 457b plan participation does NOT make one an active participant. Of course, even if an active participant cannot take an IRA deduction, they can still make a non deductible contribution. They may also be able to make a Roth IRA contribution as a Roth has considerably higher income limits before contributions are not allowed. A Roth contribution is always better than a non deductible TIRA contribution.
Permalink Submitted by John Bannan on Sun, 2017-02-19 17:53
Thanks for the feedback. More speciifcially, if an individual is covered by a state pension plan, can they contribute to a self-directed IRA and claim the deduction? Please use the link in my original post as a reference.
Permalink Submitted by Alan - IRA critic on Sun, 2017-02-19 22:02
Self directed IRA is a traditional IRA, and the pension plan is considered a qualified retirement plan. Therefore, the usual MAGI limits apply for purposes of determining the IRA deduction. Box 13 of the W-2 should be checked, but if it isn’t the reason needs to be determined/