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Author: wtantonio Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75379  
Subject: IRA AND TAX QUESTIONS Date: 1/28/2009 2:13 PM
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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? another question...... 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?
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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65229 of 75379
Subject: Re: IRA AND TAX QUESTIONS Date: 1/28/2009 2:32 PM
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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

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Author: wtantonio Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65230 of 75379
Subject: Re: IRA AND TAX QUESTIONS Date: 1/28/2009 3:01 PM
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the tax benefits i was trying to get was, let's say current taxable wages (after 401(k) contributions) is $100k, and i contributed the $5k limit to the rollover IRA before April 15, would my taxable wages be $95k?

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65231 of 75379
Subject: Re: IRA AND TAX QUESTIONS Date: 1/28/2009 3:07 PM
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the tax benefits i was trying to get was, let's say current taxable wages (after 401(k) contributions) is $100k, and i contributed the $5k limit to the rollover IRA before April 15, would my taxable wages be $95k?

Probably not, but it depends on your MAGI, not 'taxable wages'. The rollover IRA is your wife's IRA. Was your wife eligible for a 401(k) in 2008? Is the taxable income that you are referencing your joint income, your income, or your wife's income?

You need to read IRS Pub 590.

AJ

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Author: wtantonio Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65232 of 75379
Subject: Re: IRA AND TAX QUESTIONS Date: 1/28/2009 3:25 PM
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yeah, i'll read it....

the taxable income i mentioned was joint income. i contribute to my 401(k), my wife contributes to her 403(b). i just didn't know if one could have both 401(k)/403(b) and an IRA and use our IRA contribution to help lower our taxable income.

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65233 of 75379
Subject: Re: IRA AND TAX QUESTIONS Date: 1/28/2009 5:03 PM
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You can have both a 401k, 403b, and as many IRAs as you like. The total contribution you can make to your IRAs is the same as if you did not have a 401k or 403b. However, if you make over the limits of income already discussed, your IRA contribution will not be tax deferred. In other words, depending on your total income, you may not be able to lower taxable income, but once you have investments inside an IRA, you can trade or receive interest or dividends and there will be no tax on those proceeds.
You may consider a Roth IRA, if your income level allows it. In a Roth, the contributions are after tax but then if you follow the rules, there is no tax on the capital gains, dividends or interest within the Roth.

Best wishes, Chris

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65234 of 75379
Subject: Re: IRA AND TAX QUESTIONS Date: 1/28/2009 5:37 PM
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the taxable income i mentioned was joint income. i contribute to my 401(k), my wife contributes to her 403(b). i just didn't know if one could have both 401(k)/403(b) and an IRA and use our IRA contribution to help lower our taxable income.

At a joint wage level of $100k after 401(k) contributions, and with each of you eligible for a company sponsored retirement plan, it is unlikely that your MAGI would allow you to deduct traditional IRA contributions. However, at lower MAGI levels, it is possible to both be eligible for a 401(k) or 403(b) and deduct traditional IRA contributions.

So, it is possible, but probably not for you.

Note: the deductibility for traditional IRAs with respect to employer sponsered retirement plans only takes into account if you are eligible for such a plan, not if you contributed to the plan.

AJ

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Author: wtantonio Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65235 of 75379
Subject: Re: IRA AND TAX QUESTIONS Date: 1/29/2009 10:24 AM
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makes sense..... thanks to everyone for their input, it is greatly appreciated. i also found the following helpful:

"You can also save for retirement on your own with an Individual Retirement Account (IRA). If you don't participate in a retirement plan at work, or even if you do and your income falls within eligibility limits, you can make tax deductible contributions of up to $5,000 to a traditional IRA in 2008, plus an additional $1,000 in catch-up contributions if you are 50 or older. Both numbers remain the same for 2009.

If you participate in a workplace-based retirement plan, you can still make tax-deductible contributions to an IRA if you are single and your income is less than $53,000 in 2008.

If your income is between $53,000 and $63,000, you qualify for a partial deduction. If you are married filing a joint return, the phase-out limit for deductible IRA contributions begins at $85,000 in 2008 and the write-off disappears once your income tops $105,000. (For 2009, the phase-out zone for singles rises to between $55,000 and $65,000; for married couples the deduction will phase out as income on a joint return rises from $89,000 to $109,000.)

If you don't participate in a retirement savings plan at work, but your spouse does, you can make tax-deductible contributions to an IRA if your adjusted gross income on your joint return is $159,000 or less. You can claim a partial deduction if your income is between $159,000 and $169,000. You can't deduct your IRA contribution once your income tops $169,000. (For 2009, this phase-out zone will be between $166,000 and $176,000.)"

http://turbotax.intuit.com/tax-tools/tax-tips/tax-planning-a...

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65236 of 75379
Subject: Re: IRA AND TAX QUESTIONS Date: 1/29/2009 11:24 AM
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If you don't participate in a retirement plan at work, or even if you do and your income falls within eligibility limits...

Well, on first read, I would say that Intuit and/or Kiplinger is miswording this, unless they define "participate" somewhere else that I didn't see in the reference. The IRS, in Pub 590 (as previously suggested for reference), says "covered", not "participate". For instance:

If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more of your traditional IRAs

Someone reading the Intuit site could easily misunderstand Intuit's version of "participate" to mean "contribute to", rather than the correct "covered by" (the IRS' definition), and determine that because they did not contribute to their 401(k), they are eligible to deduct an IRA contribution, when in actuality they aren't.

As previously suggested, Pub 590 also has the income limits - look for Table 1-2.

It's usually best to go to the source, when it's available.

AJ

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Author: PTKeil Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65249 of 75379
Subject: Re: IRA AND TAX QUESTIONS Date: 1/30/2009 6:18 PM
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Found this website for those of you who are hovering between the lower and upper MAGI limits for IRA contributions. If you scroll down they tell you how to calculate what you can put into an IRA if you know your approx MAGI.

http://www.investopedia.com/university/retirementplans/rothi...

I hope their math is right.

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