The Rules For Contributing to Multiple Retirement Accounts In The Same Year

Quite often, we are faced with several options for retirement savings.  With these decisions, it is important to understand what options are actually available to you – such as, can you contribute to both a 401(k) or 403(b) plan and an IRA in the same year?

Combinations

If you have a retirement plan available to you at your employer (401(k), 403(b) or traditional pension), depending upon your income you may be able to contribute to an IRA (a traditional, deductible IRA) in the same year.  See Annual Limits for Retirement Plans for the income limits.

As you can see, these income limits are relatively low, so the likelihood of having the deductible IRA available to you is pretty limited.  On the other hand, the income limits for Roth IRA contributions are much higher, so for most this is a viable option.

If your income is higher than the limits for a Roth IRA contribution, you still have another option available to you:  non-deductible traditional IRA contribution.  In this contribution there is no income limit at all.  The primary value you receive from this sort of contribution is in the tax deferral that any growth in your account receives – as your investments accrue growth (hopefully) you will not have to pay tax on that growth until you withdraw the funds.

In addition, there are often cases where you may have more than one employer plan available to you.  The limitation here is that you can contribute fully to either a 401(k) plan or a 403(b) plan up to the limit, but only one limit applies to all of these plans you may have available to you.  Depending upon your employer, you may also have a 457 (generally only available to governmental units) with a separate annual limit available to you.

Regarding mixing Roth IRA and traditional IRA (either deductible or nondeductible), you have only one annual contribution limit available to you for all IRA contributions.  The combination of all IRA contributions can not be greater than that limit.

All of these limitations also apply to the catch-up provisions for folks age 50 or better.  Use the following table to help you better understand the combinations of accounts that are available to you.  To use the table, you first determine which type of account you presently have available to you in the left column – and then move across that row in the table to see which other additional accounts are available to you and with what limitations (the numbers refer to the footnotes below the table).  If the answer in the box is “Yes”, you can, without limit, contribute to the other plan.

401k 403b 457 IRA Roth Nondeductible
401k 1 1 Yes 2 3 Yes
403b 1 1 Yes 2 3 Yes
457 Yes Yes Yes Yes Yes Yes
IRA 2 2 Yes 4 4 4
Roth 3 3 Yes 4 4 4
Nondeductible Yes Yes Yes 4 4 4
Footnotes:
1: a single contribution limit applies for the year, no matter how many 401(k) plans you are eligible to participate in
2: within income limits, if you are eligible for a 401(k) or 403(b) plan, you may also be eligible to contribute to a deductible IRA
3: within income limits, participation in a 401(k) or 403(b) plan has no impact on Roth IRA contributions
4: for all IRA contributions (Roth, traditional deductible or nondeductible) contributions are limited by the annual limit.

Spousal IRAs

If your spouse is not employed by an employer that sponsors a retirement plan (including a traditional pension) and you may be able to make either a traditional deductible IRA contribution or a Roth IRA contribution – up to the limit for the year for all IRA contributions for this individual.

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

An IRA Owner's Manual
A Social Security Owner's Manual

8 Comments

Leave a comment
  • If I have a personal defined benefit plan and an employee sponsored Simple IRA can I contribute to both of them in the same year? Thank you!

  • Good question, Tim –

    SIMPLE IRA contributions, even though there are different limits, are counted toward 401(k) contribution limits for the year. So if you make the full $14,000 contribution to a SIMPLE IRA plan and you have a 401(k) at another employer, you are limited to the difference ($8,000) in overall contributions to this other plan.

    I know, that’s not what you asked, but the point is that for coordination, SIMPLE IRA contributions are treated similarly to 401(k) contributions. As such, if your income fits within the limits (see this article on 2012 limits for more information), you could still make deductible contributions to a Traditional IRA or regular contributions to a Roth IRA. With your SIMPLE IRA you are considered “covered by an employer plan”.

    If you are above the income limits, you can still make a non-deductible contribution to a Traditional IRA – there is no limit on income for that contribution.

    jb

  • I have a SIMPLE IRA through my employer. Catch-up contribution limit for 2012 is $14,000. Can I also contribute $6k to a traditional or other IRA?

    Tim

  • Utra –

    You are correct, typically the 457 plan will not have an impact on any other plan as it is covered in by another section of the code.

    jb

  • jim

    i have 457plan and 403b plans from two employers. i also have Sep IRA account. i am contributing
    the maximum for both 457 and 403b (total of 33000).
    when funding Sep IRA, what is the maximum I can contribute? I was told that I did not have to take into account the amount contributed for 457 account since it comes under different category
    when calculating the annual limit of 49000?
    Hope you can help

    Uthra

  • Chuck,

    The limit for IRAs for a person under age 50 is $5,000. That is the total limit for either a Roth or a traditional IRA, or any combination of the two. If you’re at least age 50 in 2011, you can add $1,000 for a catch up provision.

    So, the answer to your question is no, you can’t contribute a total of $7,500 to the two types of IRA. You’re limited to $5,000 (or $6,000 if age 50 or better).

    Hope this helps.

    jb

  • As a single parent, can I contribute to a traditional IRA the full $2500 limit and a Roth IRA the full $5000 limit? (Total $7500)

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Copyright 2014 FiGuide.com   About Us   Contact Us   Our Advisors       Login