Understanding Retirement Account Options

There are various types of retirement accounts and it can be confusing to understand when you can contribute to one or multiple of these accounts. The below information should help clarify things a bit. Please note that these are only guidelines and not a comprehensive list of all of the IRS rules pertaining to these types of accounts. This is intended to answer the most common questions.

  • Contributions to traditional 401k and IRA accounts are typically made with pre-tax dollars.
  • Contributions to Roth 401k and IRA accounts are always made with after-tax dollars.
  • 401k accounts (both traditional and Roth) have no income limitations and traditional 401k accounts are fully deductible regardless of income. Anyone with earned income can contribute to either type of 401k account.
  • IRA’s – There are rules that pertain to your eligibility to contribute to these accounts and rules that pertain to the deductibility of your contributions.
    • Rules pertaining to eligibility are for Roth accounts.
    • Rules pertaining to deductibility are for traditional accounts.

Contributing to Multiple Accounts (in the same year)

First, some questions and answers about the options. Following the Q&A, there is information about income limits.

Q1: Can I contribute to both a traditional 401k plan and a traditional IRA?
Yes, but…whether your IRA contributions are fully deductible depends on your income.


Q2: Can I contribute to both a traditional 401k plan and a Roth IRA?
Maybe. Whether you’re eligible to contribute to a Roth IRA depends on your income.


Q3: Can I contribute to both a Roth 401k plan and a traditional IRA?
Yes, but…whether your IRA contributions are fully deductible depends on your income.


Q4: Can I contribute to both a Roth 401k plan and a Roth IRA?
Maybe. Whether you’re eligible to contribute to a Roth IRA depends on your income.


Q5: Can I contribute to both a traditional 401k plan and a Roth 401k?
Yes, but…the combined total of your pre-tax contributions and Roth contributions can’t exceed $19,500 (plus an additional $6,500 if you’re age 50 or over). Note: This maximum doesn’t include employer matches nor after-tax contributions to your traditional 401k account.


Q6: Can I contribute to both a traditional IRA plan and a Roth IRA?
Maybe. Whether you’re eligible to contribute to a Roth IRA depends on your income.
The combined total of your contributions can’t exceed $6,000 (plus an additional $6,500 if you’re age 50 or over).


What are the income limits for determining eligibility for a Roth IRA?

  • 2021 – Modified AGI below $208,000 (MFJ) or $140,000 (single)

What are the income limits for determining deductibility for contributions to a traditional IRA?

  • If you are NOT covered by a 401k or other employer-sponsored plan –
    • Single or married – no income limits, contributions are 100% deductible
  • If you ARE covered by a 401k or other employer-sponsored plan –
2021 Traditional IRA Income Limits

Source: https://www.irs.gov/retirement-plans/2021-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work


Deprecated: Directive 'allow_url_include' is deprecated in Unknown on line 0