Can you open a Roth if you contribute to your company 401(k)?

[FundeK]

I would like to open a Roth for both my husband and myself. We both contribute to our company's 401(k) plans. Can we both contribute $3,000 if our AGI is less than $150,000? We can't open traditional IRAs right?

[Lame Duck]

Yes. Only the requirements for earned income and the income limitations ($150,000) are factors in determining eligibility for as Roth IRA. Participation in a 401(k) plan will not preclude funding a Roth IRA. You are also correct in the fact that your participation in 401(k) plans will preclude a traditional IRA contrbiution since your AGI is above the threshhold.

[Appleby]

You can establish a Roth IRA (one for each spouse) and each spouse may contribute $3,000 ( $3,500 if at least age 50 by year-end)

You can establish and contribute to a traditional IRA (one for each spouse), but you may not be able to deduct the contribution. See http://www.investopedia.com/articles/retir...t/03/011603.asp

[Appleby]

Yes.  Only the requirements for earned income and the income limitations ($150,000) are factors in determining eligibility for as Roth IRA.  Participation in a 401(k) plan will not preclude funding a Roth IRA.  You are also correct in the fact that your participation in 401(k) plans will preclude a traditional IRA contrbiution since your AGI is above the threshhold.

Lame Duck- we posted almost simultaneously.

I think you meant to say may preclude a deduction instead of “will preclude a traditional IRA contribution“ right?

[Lame Duck]

You're right. I was answering in terms of deductibility, since I can't conceive of a reason where a person would ever make a non-deductible contribution to a traditional IRA where a Roth IRA alternative is available.

[John G]

A reminder on Roth eligibility:

Tax filing status sets the maximum adjusted gross income to qualify for a Roth. These are often overlooked when folks say you just need earned income and meet the income limits. Which income limits? There are three:

"Married filing separately" has a max AGI of $10,000 - which just about kills off the Roth... unless you are so poor that you qualify, but don't have the funds to contribute!

Single head of household threshold is $110,000.

Married filing jointly is $160,000.

And, just because Congress and the IRS want to keep things very simple... of course there are phase out ranges where you qualify for only a partial contribution.

Frankly, the Roth rules could have been a lot simpler... but that is another story.

[Appleby]

I agree. For a summary of how the Roth and the traditional IRA stack-up against each other, see http://www.investopedia.com/articles/retir...t/03/012203.asp