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The short answer is that you can have both an IRA and a 401(k) plan, and many people do. Contributions to a traditional IRA and 401(k) plan may be tax-deductible, providing tax-deferred savings for retirement.
But bear in mind that there are annual contribution caps on each type of retirement account, and that your IRA contribution may be restricted based on your modified adjusted gross income as well as whether you or your spouse currently have a 401(k) plan.
Yes, you can contribute to both a 401(k) and an IRA after retirement, but there are some important things to keep in mind.
Contributing to a 401(k) After Retirement
You can continue to contribute to your 401(k) after you retire, as long as you are still working for the same employer that sponsors the plan. However, there are some limitations on how much you can contribute.
- Traditional 401(k)s: For 2023, the contribution limit for traditional 401(k)s is $22,500, or $30,000 if you are 50 or older.
- Roth 401(k)s: For 2023, the contribution limit for Roth 401(k)s is also $22,500, or $30,000 if you are 50 or older.
Contributing to an IRA After Retirement
You can also continue to contribute to an IRA after you retire. However, there are some income limitations that may affect your ability to deduct your contributions.
- Traditional IRAs: For 2023, the contribution limit for traditional IRAs is $6,500, or $7,500 if you are 50 or older. However, if your modified adjusted gross income (MAGI) is above a certain threshold, you may not be able to deduct your contributions. For 2023, the income limits are:
- Single filers: $73,000 to $83,000
- Married filing jointly: $116,000 to $136,000
- Roth IRAs: For 2023, the contribution limit for Roth IRAs is also $6,500, or $7,500 if you are 50 or older. There are no income limitations for Roth IRA contributions.
Other Considerations
Here are some other things to keep in mind when contributing to a 401(k) or IRA after retirement:
- Required minimum distributions (RMDs): Once you reach age 72, you will be required to start taking RMDs from your traditional 401(k) and IRA accounts. This means that you will have to withdraw a certain amount of money from your accounts each year, regardless of whether you need the money or not.
- Taxes: When you withdraw money from your 401(k) or IRA accounts, the money will be taxed as ordinary income. This means that you will have to pay taxes on the money, even if you already paid taxes on it when you contributed it to the account.
- Penalties: If you withdraw money from your 401(k) or IRA accounts before age 59 1/2, you may have to pay a 10% penalty, in addition to the regular income tax.
Contributing to a 401(k) and IRA after retirement can be a great way to save for your future. However, it is important to be aware of the limitations and other considerations before you start contributing.
Frequently Asked Questions
Can I contribute to a 401(k) and IRA in the same year?
Yes, you can contribute to both a 401(k) and IRA in the same year. However, the total amount you can contribute to both accounts is limited. For 2023, the total contribution limit is $22,500, or $30,000 if you are 50 or older.
What is the best way to save for retirement after I retire?
The best way to save for retirement after you retire is to create a retirement budget and stick to it. You should also consider working part-time or starting a small business to generate additional income.
What are the benefits of contributing to a 401(k) or IRA after retirement?
There are many benefits to contributing to a 401(k) or IRA after retirement. These benefits include:
- Tax-deferred growth: The money you contribute to your 401(k) or IRA will grow tax-deferred, which means that you will not have to pay taxes on the money until you withdraw it.
- Potential tax deductions: Depending on your income, you may be able to deduct your contributions to a traditional 401(k) or IRA on your tax return.
- Required minimum distributions: Once you reach age 72, you will be required to start taking RMDs from your traditional 401(k) and IRA accounts. This means that you will have to withdraw a certain amount of money from your accounts each year, regardless of whether you need the money or not.
- Taxes: When you withdraw money from your 401(k) or IRA accounts, the money will be taxed as ordinary income. This means that you will have to pay taxes on the money, even if you already paid taxes on it when you contributed it to the account.
- Penalties: If you withdraw money from your 401(k) or IRA accounts before age 59 1/2, you may have to pay a 10% penalty, in addition to the regular income tax.
Additional Resources
Disclaimer
I am an AI chatbot and cannot provide financial advice. The information provided above is for general knowledge and informational purposes only, and does not constitute professional financial advice. It is essential to consult with a qualified financial advisor for any financial decisions or before making any financial commitments.
Income limits for contributing to a traditional IRA and a 401(k)
If you or your spouse are enrolled in a workplace retirement plan, the IRS deduction limits for traditional IRA contributions are shown in the table below.
|
Filing status |
2023 income range |
2024 income range |
Deduction limit |
|---|---|---|---|
|
Single or head of household (and covered by retirement plan at work) |
$73,000 or less. |
$77,000 or less. |
Full deduction. |
|
More than $73,000, but less than $83,000. |
More than $77,000, but less than $87,000. |
Partial deduction. |
|
|
$83,000 or more. |
$87,000 or more. |
No deduction. |
|
|
Married filing jointly (and covered by retirement plan at work) |
$116,000 or less. |
$123,000 or less. |
Full deduction. |
|
More than $116,000, but less than $136,000. |
More than $123,000, but less than $143,000. |
Partial deduction. |
|
|
$136,000 or more. |
$143,000 or more. |
No deduction. |
|
|
Married filing jointly (spouse covered by retirement plan at work) |
$218,000 or less. |
$230,000 or less. |
Full deduction. |
|
More than $218,000, but less than $228,000. |
More than $230,000, but less than $240,000. |
Partial deduction. |
|
|
$228,000 or more. |
$240,000 or more. |
No deduction. |
|
|
Married filing separately (you or spouse covered by retirement plan at work) |
Less than $10,000. |
Less than $10,000. |
Partial deduction. |
|
$10,000 or more. |
$10,000 or more. |
No deduction. |
» Not sure which to choose? View all of our recommendations for the top IRA accounts.
Can I contribute to a 401(k) plan and a traditional IRA?
The IRS sets annual contribution limits for both IRAs and 401(k) plans. The maximum 401(k) contribution for workers under 50 is $23,000 in 2024; employees over 50 can contribute an additional $7,500 as a catch-up contribution.
The IRA contribution cap for 2024 is $7,000, plus an additional $1,000 for individuals 50 years of age and above. You could get a yearly tax deduction for your contributions to traditional IRAs. A very similar tax benefit is provided by the 401(k) plan: if you make contributions to a traditional plan, your taxable income is reduced.
One important warning: your contribution to a traditional IRA might not be deductible at certain income levels if you or your spouse have a 401(k) or other retirement plan at work. To find out if you can deduct your traditional IRA contribution, check the IRA income limits. You might be able to deduct a portion of your contribution in some circumstances. (You can still make contributions to an IRA through nondeductible IRAs or possibly a Roth IRA even if you aren’t eligible to have your contributions tax deductible.) ).
What you should know about owning a Roth IRA in addition to a 401(k) plan
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