Legal Blog
The Weekly Scenario: Can I max out both my IRA and 401(k) this year?
Question: Can I max out both my IRA and 401(k) this year?
Answer: You can max out both your IRA and 401(k) plan, that is to say, your employer sponsored retirement plan contribution does not affect your eligibility to contribute to an IRA, or vice versa.
Example: 57-year-old Kate maintains a 401(k) for her sole proprietorship. Based on the compensation she receives from her business, she is eligible to contribute $56,000 to her 401(k) account, plus a catch-up contribution of $6,000. Kate decides to contribute the full $62,000 ($56,000 + $6,000). She may still contribute $7,000 to an IRA (i.e., $6,000 plus the $1,000 catch-up contribution).
Reminders: Regular contributions to Roth IRAs are subject to modified adjusted gross income (MAGI) limits. Participation in a 401(k) might also affect Kate’s eligibility to claim a deduction for contributions to a traditional IRA. One of the factors that affects deducibility is her MAGI.
As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or .
ABOUT STEVE SHANE
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.
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