In a given year can I contribute to both (my employer's 403(b) and the IRA I set up myself?

Question

My employer has a 403(b) and I set up an IRA account in 2006. Can I contrbute money to both this year?

Do I need to max out the contributions to 403(b) before adding money into an IRA?

If I can only contribute to the 403(b), but I've already put money into the IRA this year, can I still write it off on my '07 taxes?

Thanks,
David

Answer 1

That depends upon your income since you are covered by a qualified retirement plan with your employer. The deductibility of IRA contributions if you're covered by an employer-sponsored retirement plan starts to phase out at certain income levels depending upon your filing status. For a single taxpayer, that starts at $50,000 and the deduction is gone entirely at $60,000.

Get a copy of IRS Pub 590 from the IRS website. It will tell you every thing you need to know.

Answer 2

Yes, you can contribute money to both. You can contribute up to $4,000 to an IRA account. If its a traditional IRA, you may get a tax deduction for the contribution if you meet certain conditions. For a single person, if you make under $50,000 you could take the deduction. If you make over $60,000 you do not get any tax deduction. If you set up a Roth IRA, there is no tax deduction for the contribution.

You do not need to max out the 403(b) before adding money to the IRA.