Can I contribute to my 401k and a roth IRA? | 401k Questions

Question

Asked 4/17/2007

Can I contribute to my 401k and a roth IRA?

I have $4000 in my roth IRA for 2006; and another 4M for a 401k..

Does a 401k count as an IRA? Because the 401k money has already been taken out of my paycheck and is not part of my w-2 wages. But do I claim it as an IRA?

I just don't know what I need to report to the IRS. If I put the 401k income as an IRA (in addition to the Roth IRA) it tells me I have over contributed to the account and must withdraw or I can't use my roth.

>help<

Answers

Answer 1/1 - Submitted 4/18/2007

Hi Mary,

First thing is 401k is NOT a IRA type account. It is a retirement plan account offered by your employer while IRA is individual retirement account.

So do not count 401k towards IRA contribution. In fact 401k maximum contribution is $15000 for year 2006 irrespective of your IRA contribution.

If you are eligible, you can contribute up to $4000 to IRA accounts in total.

In case of Roth IRA, typically you do not need to report to the IRS as your broker/bank (which holds your roth account) informs IRS about it via form 5498.

Check this comparison of 401k vs Roth IRA:
http://theusefulinfo.com/finance/compare4R.html

Not a legal adive.
- Infoman

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