Question about contribution limits of IRAs and 401Ks

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KSC99354
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Question about contribution limits of IRAs and 401Ks

Postby KSC99354 » Wed Aug 24, 2011 6:36 pm

Sorry if this has been asked before.

I know the IRA limit for 2011 is $5,000 (under 50). I also know the 2011 limit for 401ks is $16,500. But if I invest in both, is the combined limit $21,500? or am I limited to $16,500 just able to put $5,000 of that in an IRA?

That's my main question, but I have another if someone would like to answer.

If someone wanted to set up a traditional IRA, how is that set up from a pre-tax basis? I mean with my 401k, the tax I pay through my job is already offset from the amount I put into the 401k. It's automagic. How is that handled with an IRA? Do you pay into it with tax being calculated normally and then the tax you owe gets adjusted at filing time or what?

Thanks,
Kirt

emoore
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Re: Question about contribution limits of IRAs and 401Ks

Postby emoore » Thu Aug 25, 2011 5:36 am

The limit for a ROTH IRA is 5000 and yes the total you can put in per year assuming you are eligible for a Roth is 5000 + 16500 = 21500.

I am not totally sure about the rules for a Traditional IRA but in order to put money in pre tax I believe you cannot have a 401k offered by your employer. I might be wrong.

bpgui
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Re: Question about contribution limits of IRAs and 401Ks

Postby bpgui » Thu Aug 25, 2011 8:05 am

emoore wrote:I am not totally sure about the rules for a Traditional IRA but in order to put money in pre tax I believe you cannot have a 401k offered by your employer. I might be wrong.

You still can IF you are under the income limits. I don't know them off the top of my head, but googling "IRA contribution limts" should get you a chart detailing those limits.

stannius
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Re: Question about contribution limits of IRAs and 401Ks

Postby stannius » Thu Aug 25, 2011 10:46 am

bpgui wrote:
emoore wrote:I am not totally sure about the rules for a Traditional IRA but in order to put money in pre tax I believe you cannot have a 401k offered by your employer. I might be wrong.

You still can IF you are under the income limits. I don't know them off the top of my head, but googling "IRA contribution limts" should get you a chart detailing those limits.


Also it only matters if you are participating in your employer's 401(k).

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Re: Question about contribution limits of IRAs and 401Ks

Postby DoingHomework » Fri Aug 26, 2011 8:38 am

stannius wrote:
Also it only matters if you are participating in your employer's 401(k).


I'm fairly sure that it doesn't matter if you participate but rather if you are eligible to participate.

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Re: Question about contribution limits of IRAs and 401Ks

Postby stannius » Mon Aug 29, 2011 12:20 pm

DoingHomework wrote:I'm fairly sure that it doesn't matter if you participate but rather if you are eligible to participate.


That's what I used to think. In fact I made a comment very similar to yours (I forget if it was on a blog or forum), and was corrected by another commenter. I went and read the regulation(s) in question and agreed with their interpretation.

I'm not sure it matters that much. The following would all have to be true just to even make it a consideration:
a) No employer match
b) Make more than cut-off (which is higher than the median AGI)
c) Save less than $5000 into retirement accounts
d) A reason to push the person off the fence, e.g. mediocre to bad 401(k) plan.


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