Hi all..I particiapte in a defined benefit plan at work. And fortunately or unfortunately (depending on how you look at it) I don't qualify for a Roth IRA this year as my income has increased. I am wondering if inclusion in the DBP precludes me setting up a traditional IRA? I thought I remembered reading something about not being able to use a traditional IRA if you were already included in a retirement plan at work.Please let me know your thoughts.Kevin
Welcome, Kevin. Glad you could join us.The defined benefit plan does not prevent you from contributing to a traditional IRA each year. It does reduce the income limits above which those contributions are no longer tax deductible.IRA is a good deal, but the low $3K contribution limit is pretty small for someone in your income bracket. You will want to contribute to your 401K plan at work too if you have one--at least to max the pretax limit. Then you probably want to get into taxable investments. If you use the LTBH (long term buy and hold) system, those investments will be taxed at capital gains rates. That can potentially be better than an IRA since it gets taxed at ordinary income tax rates in retirement.
That is good news. We don't currently have a 401K at work as most of our retirement money goes towards the DBP. As I understand it, we have a certain amount of $ to contribute to the DBP each year and the establishment of a 401K will reduce that number of $ (which we don't want.)Yes I think I will at least throw $3K into my IRA and then contribute more to my taxable accounts.Too bad I don't qualify anymore for the Roth. It is such a great deal. I just can't think of any way to "hide" my income so I still qualify.Thanks again for the response.Kevin
Now I am getting conflicting information from the administrator of our DBP that says I CANNOT fund a traditional IRA in addition to our DBP.This is what she says..Hi Kevin,I am the right person to contact with this question. I've researched it for you and inclusion in the Defined Benefit Plan does exclude you from contributing to a traditional IRA.She offers no explanation, just a "no". I asked her for details but she has not gotten back to me yet.Anybody have any thoughts on this?Kevin
kewilliam: "Now I am getting conflicting information from the administrator of our DBP that says I CANNOT fund a traditional IRA in addition to our DBP.This is what she says..'Hi Kevin,I am the right person to contact with this question. I've researched it for you and inclusion in the Defined Benefit Plan does exclude you from contributing to a traditional IRA.'She offers no explanation, just a "no". I asked her for details but she has not gotten back to me yet.Anybody have any thoughts on this?"Your administrator is FOS! Inclusion in the defined benefit plan, may, depending upon your income, make you ineligible to deduct a contribution to a traditional IRA, but it does not make you ineligible to contribute to an IRA.If you cannot deduct the contribution, and you are eligible to contribute to a Roth IRA, then making the Roth contribution instead of a non-deductible, traditional IRA deduction is one of the few virtually no-brainer decisions around.I cannot give you the citations, chpater and verse, but the gurus on the tax board could (you might even check its FAQ) or you could review www.fairmark.comRegards, JAFO
most of our retirement money goes towards the DBP.>>>>>Who is custodian of these funds? Inside or outside of the company. If inside and available to the management would wave a big red flag to me at least. If outside the control of the company then what are the expenses and fees. Both can have serious effects on funds actually available at retirement. I used to work for the Federal Government. Talk about a place where they spend whether there is any or not. Seven trillion and counting fo debt. Spend over a billion more than income each day. But they print more as needed. My money is reasonably secure for that reason. On the other hand our own reserves probably would support us indefinatly into the future.Zero debt for a long time made it easier to have big investments. Will the DB plan have any inflation protection, or is it just fixed for life payout. If fixed, you can be wiped out pronto even if you get a hundred thousand a year when bread costs a hundred a loaf, cars at a half million and worse in hyperinflation. Look at Germany in the twenties. They printed hundred million mark bills that wouldn't buy a meal.
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