SIMPLE IRA Cont.- do they affect Traditional limits?
If a participant in a SIMPLE IRA plan has $12,000 in compensation, is over age 50 and subsequently contributes that full amount through salary deferrals into their SIMPLE, are they also able to make a contribution to their traditional IRA (they don’t care about deductibility), and that of their non-working spouse?
In effect, this would mean that the individual has $12,000 in compensation, but is making $24,000 in contributions ($12,000 to the SIMPLE, $6,000 to a traditional IRA and $6,000 to a spousal IRA).
Is this possible or do the SIMPLE IRA contributions effectively “eliminate” the client’s compensation?
Permalink Submitted by Marvin Rotenberg on Mon, 2008-12-15 18:43
YES. An employee over age 50 with compensation of $12,000 can contribute $6,000 to a triditional IRA and contribute $6,000 for the non working spouse in addition to the salary deferral of $12,000 for a SIMPLE IRA.
The rule for a business owner is a little different. For example, a self employed person contributing to a 401(k) would have to reduce their total compensation by the amount contributed to the 401(k) plan.