The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing

URL:  http://boards.fool.com/if-for-tax-year-2008-i-contributed-to-my-401k-27389767.aspx

Subject:  Re: IRA AND TAX QUESTIONS Date:  1/28/2009  2:32 PM
Author:  aj485 Number:  65229 of 76392

if for tax year 2008, i contributed to my 401(k) at work, can i contribute the $5k max to an IRA and still reap the tax benefits?

It depends on what type of 'tax benefits' you are trying to 'reap'.

If you meet the MAGI requirements (see IRS Pub 590 http://www.irs.gov/pub/irs-pdf/p590.pdf ) for deducting traditional IRA contributions, you will be able to reap a current deduction benefit, plus a future tax deferral benefit, where you don't have to pay taxes until withdrawal.

If you meet the MAGI requirements for a Roth contribution, you can reap a Roth benefit of paying taxes now in order to be able to take tax-free withdrawals in the future.

If you don't meet either of the MAGI requirements, then you will still be able to make a non-deductible contribution and reap the tax deferral benefit.

when we moved, my wife left some retirement funds from her previous job. i was hoping to open a rollover IRA to transfer those funds. if i were to open the rollover IRA, could i contribute the $5k max to that account and still reap the tax benefits?

You are allowed to make contributions to an IRA that contains funds that have been rolled over. The discussion above about tax benefits applies to contributions under this circumstance, too.

AJ
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us