Thanks Venturion..

I'm sorry..i found out that I contributed 5.8K in 401K. Can I still contribute to Traditional IRA?

FWF the new google

Venturion said:No sweat. Your eligibility to contribute to an IRA or ROTH IRA are not linked to your participation in a 401(k) plan. The IRA (or Roth) eligibility is linked solely to having income, being below certain thresholds for MAGI (101K for single and 159K for married joint), and a combined limit of 4K for both if you're under 50 and 5K for over 50. I'm remembering much of this from memory, so consult with your tax adviser and/or IRS for concrete answers.

I think it's less than that number because I was trying to contribute 4K to a traditional this year to offset some taxes and it told me that I was above the income limit for a tax advantage. Maybe there is a difference between the tax advantage and eligibility. Does anyone know? We did not exceed 159K for our income.

whatweworkfor said:bpd67 said:Venturion said:No sweat. Your eligibility to contribute to an IRA or ROTH IRA are not linked to your participation in a 401(k) plan. The IRA (or Roth) eligibility is linked solely to having income, being below certain thresholds for MAGI (101K for single and 159K for married joint), and a combined limit of 4K for both if you're under 50 and 5K for over 50. I'm remembering much of this from memory, so consult with your tax adviser and/or IRS for concrete answers.

I think it's less than that number because I was trying to contribute 4K to a traditional this year to offset some taxes and it told me that I was above the income limit for a tax advantage. Maybe there is a difference between the tax advantage and eligibility. Does anyone know? We did not exceed 159K for our income.

At your income level, a trip to a CPA might be prudent.

At what income level? I did not exceed 159K. Is there a limit that you can still contribute but can't get a tax break? That's what I'm asking.

bpd67 said:whatweworkfor said:bpd67 said:Venturion said:No sweat. Your eligibility to contribute to an IRA or ROTH IRA are not linked to your participation in a 401(k) plan. The IRA (or Roth) eligibility is linked solely to having income, being below certain thresholds for MAGI (101K for single and 159K for married joint), and a combined limit of 4K for both if you're under 50 and 5K for over 50. I'm remembering much of this from memory, so consult with your tax adviser and/or IRS for concrete answers.

I think it's less than that number because I was trying to contribute 4K to a traditional this year to offset some taxes and it told me that I was above the income limit for a tax advantage. Maybe there is a difference between the tax advantage and eligibility. Does anyone know? We did not exceed 159K for our income.

At your income level, a trip to a CPA might be prudent.

At what income level? I did not exceed 159K. Is there a limit that you can still contribute but can't get a tax break? That's what I'm asking.

There is no limit. you can contribute without getting tax breaks. you have to file a form with irs. see http://www.fatwallet.com/forums/topic.php?catid=52&threadid=628604 for more info.

cps1584 said:

There is no limit. you can contribute without getting tax breaks. you have to file a form with irs. see http://www.fatwallet.com/forums/topic.php?catid=52&threadid=628604 for more info.

I don't think it's correct. There is a limitation above which the IRA contributions are not allowed.
For 2007 that's $156K for married,$99K for single.

I'd start with IRS Publication 17 to find the answers.

bpd67 said:whatweworkfor said:bpd67 said:Venturion said:No sweat. Your eligibility to contribute to an IRA or ROTH IRA are not linked to your participation in a 401(k) plan. The IRA (or Roth) eligibility is linked solely to having income, being below certain thresholds for MAGI (101K for single and 159K for married joint), and a combined limit of 4K for both if you're under 50 and 5K for over 50. I'm remembering much of this from memory, so consult with your tax adviser and/or IRS for concrete answers.

I think it's less than that number because I was trying to contribute 4K to a traditional this year to offset some taxes and it told me that I was above the income limit for a tax advantage. Maybe there is a difference between the tax advantage and eligibility. Does anyone know? We did not exceed 159K for our income.

At your income level, a trip to a CPA might be prudent.

At what income level? I did not exceed 159K. Is there a limit that you can still contribute but can't get a tax break? That's what I'm asking.

So apparently since we both have 401K's, (she switched jobs mid-year and can't start new plan until 08), you can only get a tax break up to 103K AGI, I knew I kept seeing that number. So contributing to a traditional will not give me a tax break, might as well contribute to the Roth then.

gkl said:Apparently, Traditional IRA doesn't have those limitations for contributions, but has similar limits of MAGI to determine if the amount would be deductible.Only if you or your spouse actively participates in an employer plan.

Southpaw75 said:So should I invest $5,000 (after tax money) in a trad IRA which is deductible and I would see a net gain of $1250 in 2007 taxes (assuming 25% tax bracket) but I would have to pay tax upon withdrawing at retirement age
Or should I invest the $5,000 in a Roth IRA which nets me no tax break for 2007 but would grow tax free?(If you invested $5000 in a traditional IRA and got a deduction, it wouldn't be after-tax money anymore.)

This is a very fundamental question. There are several factors to consider, but the most important one is what you think is going to happen to your tax rate in the future. I know that nobody knows what the future holds, either for them personally or for our tax policy, but whatever you do, you're really betting on that.

Are you in the 25% bracket now because you're temporarily unemployed (or medium-term, to stay home with kids, for example)? Do you expect to go up to the 35% bracket soon and stay there? If so, you probably want a Roth IRA, so that your money is taxed at today's 25% instead. Conversely, are you right at the peak of your earning power now, and expect to be in the 15% bracket in retirement? In that case, you probably want the traditional IRA, because it's worth paying 15% later to get a 25% deduction today.

If you think you're staying at the same rate, or not changing much, I would go with the Roth for a number of reasons (ability to withdraw your contributions without penalty, ability to let the money sit instead of having to take withdrawals when you turn 70 1/2, ability to effectively contribute more since $5000 after tax is "really" more money than $5000 on which you'll have to pay tax later...). But if you are confident you'll ever be in a lower tax bracket, even temporarily, I would go with the traditional and try to convert later.