Can i open 401K and contribute to 2006 tax year?

Question

Can i open 401K with my employer now before April 17, 2007 and contribute to 2006 tax year and get tax deductions?

Answer 1

No. You can only open a 401(k) when you first become eligible to participate or during your employer's open enrollment period. A 401(k) opened now and any deferrals deposited to it would be for the 2007 tax year.

And you don't make deposits to one, your employer deducts your investment from your pay and deposits it to the account on your behalf.

You CAN open an IRA and make a deposit by April 17, 2007 for tax year 2006. Whether or not you would get a deduction for the deposit would depend upon your income since you appear to be covered by a qualified pension plan through your work, even if you are not currently participating in it.

Answer 2

Nope...401k deferrals must be on 2006 earnings to be deductible and the deferral agreement must be signed and in place prior to 12/31. You're out of luck in both cases. You can contribute to an IRA though.

Answer 3

I agree with B. You should also consider a Roth IRA. They are especially great if your marginal tax rate is low now but you expect to have a higher one later (b/c you make more over time, we hope). Pay the low taxes now, laugh later.