Can I Have a Traditional IRA If My Employer Has a 403b?
Many investors look to tax-deferred retirement programs to help provide adequate income sources when they retire. Contributing to more than one type of tax-deferred account allows investors to defer more money, saving on current taxes. Most people can invest in both a 403b Tax-Sheltered Annuity and an IRA, but, due to income limitations, some individuals may be prevented from doing so.
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Traditional Income Limits
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A 403b annuity is offered to public school employees and certain non-profit organization employees. Employees covered by the employer plan are allowed maximum contributions to a traditional IRA as long as their income does not exceed $56,000 for single tax filers and $89,000 for joint tax filers, as of 2010. There is a phaseout range that allows a partial deductible contribution for single filers making between $56,000 and $66,000 of gross income. Joint filers have a phaseout threshold between $89,000 and $109,000. Anything above these limits is a non-deductible contribution where only earnings within the plan are tax-deferred.
Roth Income Limits
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Roth IRAs grow tax-free and are not contingent on whether or not you are covered by an employer's plan. Thus any employee who has a 403b plan may open a Roth IRA as long as he meets the Roth IRA income limits. As of 2010, joint filers can make a full contribution as long as income is less than $167,000. The phaseout contribution range goes up to $177,000. Single filers must make less than $105,000 to make a full Roth contribution with the phaseout range ending at $120,000.
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IRA Maximum Contributions
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The 2010 IRS regulations allow up to $5,000 of earned income as an IRA contribution. It does not matter whether the $5,000 is applied to a traditional or a Roth as long as the participant meets the income guidelines. Investors over the age of 50 are allowed a catch-up contribution of an extra $1,000 per year. All contributions must not exceed earned income, though the funding may come from any source.
403b Maximum Contributions
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As of 2010, those who have a 403b are allowed to contribute a maximum of $16,500 in any year. Those over the age of 50 can add an extra $5,500 in catch-up contributions. The contributions are taken as elective salary reductions. Employers sometimes match employee contributions, increasing the amount of tax-deferred savings. The limit to total annual contributions into a 403b, including employer contributions, is $49,000.
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