IRA Contributions if you Participate in Employer Plan
Wednesday, December 15, 2010
By Beverly DeVeny, IRA Technical Expert Follow Me on Twitter:@BevIRAEdSlott
Your client is making contributions to an employer plan and he/she wants to know if its possible to also contribute to a traditional IRA or to a Roth IRA.
Yes, an IRA contribution can be made even if you contribute to an employer plan – any employer plan, including SEP and SIMPLE IRAs.
SEP and SIMPLE IRA contributions do NOT impact the amount you can contribute to a traditional or Roth IRA. You can contribute up to $5,000 to an IRA as long as you have at least that much in earned income. (There is an additional $1,000 catch-up contribution for those age 50 and over.) The safe harbor for earned income is a W-2 issued by the employer but you can use self employment income too.
Roth contributions can only be made if you meet the income limits which are indexed for inflation each year.
You can make a traditional IRA contribution, BUT it may not be deductible. There are income limits for taking a deduction and these limits also are indexed for inflation each year.
You can find the limits for Roth contributions and traditional IRA deductibility in IRS Publication 590 at www.irs.gov. On the left hand side of the screen click on Forms and Publications.
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