401(k) in addition to IRA

[Guest booboo]

I was told that if I was participating in my company sponsored 401(k) program that I could not open an IRA as well - that it had to be one or the other. Is this true?

[Guest Del Rae]

Yes and no. It's true for a deductible regular IRA if your Adjusted Gross Income is over $60,000 for Married Filed Joint, $40,000 for Single (note phase-outs apply if close to those numbers). If your Adjusted Gross Income is less than $160,000 for Married, and $110,000 (again, phase-outs apply), you could make a contribution to a Roth IRA. And finally, if your Adjusted Gross Income is over the Roth limitations, you still have the option of a Nondeductible IRA... no deduction is allowed on your tax return, of course, but you do get the benefit of deferred income on the earnings.

Hope that it is helpful.

[Guest booboo]

my agi is $53,000 married filling separately. I have a company sponsored 401(k) plan - what else am I eligible for? Thanks for your help.

[Guest Del Rae]

Regular and Roth IRAs phase-out at $10,000 for Married Filing Separate, so your remaining options are nondeductible IRAs (which have no AGI limitation) or perhaps an Education IRA, which has a phase-out starting at $95,000 for Married Filed Separate. (Education IRAs are currently $500 per beneficiary under 18)... Have you maxed out on the deduction for your 401(k)?

[Guest Lyric]

Do remember that if your are married filing separately, you are not eligible to open a Roth IRA, only if you are married filing jointly or if you are filing singly.

I don't know what the rationale is, but it's a bummer.

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Lyric