I don’t know about you, but saving extra for retirement is one of my favorite things in the world to do!
Ok, ok, maybe not, but getting tax deductions really is, so for those really looking to stash away the cash we’re going to talk about IRA’s and how much you can contribute and deduct when you’re a work plan participant.
The general rule is that you can contribute up to $5,500 /yr. to an IRA (Roth or Traditional). That number goes up to $6,500/yr. once you turn 50. That’s assuming you make more than that in a year; if you don’t you can only contribute up to 100% of what you earned. Those limits apply to each calendar year and you have until the tax deadline for that year to contribute (April 15th of the next year).
Those contribution limits are considered “coordinated” meaning you can only put in $5,500 total between both Roth and Traditional IRA’s.
A question we get a lot is “Can I still contribute to my IRA if I have a company retirement plan?”
The answer is yes, you can always contribute to a traditional IRA up to the yearly limit, but when you participate in an employer sponsored plan those contributions are only tax deductible if you’re under a certain income threshold. Below is a link to the IRS website showing those limits.
Roth IRA contributions are not tax deductible in general and you can no longer contribute to a Roth IRA, period, once you hit different income thresholds. Those being $117,000 to $132,000 if you are single and $184,000 to $194,000 if you are married.
So not only does the government charge you more in taxes when you make more money, but they stop rewarding you for saving for retirement. Isn’t that nice of them.