MORE LIKE THISInvesting401(k)Retirement PlanningRoth and Traditional IRAs
Can you have both a 401(k) plan and an IRA? The simple answer is yes, and many people do. Using a traditional IRA and 401(k) plan could provide tax-deferred savings for retirement, and even offer some tax breaks for contributing too.
However, keep in mind that each retirement account has annual contribution limits, and that your IRA contribution could be limited by both your modified adjusted gross income amount, and whether you or your spouse already have a 401(k) plan.
401(k)s left behind often get lost, forgotten, or depleted by high fees. Capitalize will move them into one IRA you control.
start consolidating
on Capitalize's website
Can I contribute to a 401(k) plan and a traditional IRA?
Both the 401(k) plan and an IRA have annual contribution limits set by the IRS. In 2024, the 401(k) contribution limit for employees under 50 is $23,000, while those 50 and older can add an extra $7,500 as a catch-up contribution.
For the IRA, the 2024 contribution limit is $7,000, with an extra $1,000 for those 50 and older. With traditional IRAs, you could receive a tax deduction for your contributions every year. The 401(k) offers a very similar tax break: if you contribute to a traditional 401(k) plan, your 401(k) contributions reduce your taxable income.
One significant caveat: If you have a 401(k) or other retirement plan at work, or your spouse does, then your contribution to a traditional IRA may not be deductible at certain incomes. You'll want to look at the IRA income limits to see if you qualify to deduct your contribution to a traditional IRA. In some cases, you may be able to deduct a portion of your contribution. (Even if you’re ineligible to deduct your IRA contribution, you can still contribute to an IRA through nondeductible IRAs or potentially a Roth IRA.)
» Here’s what to know about having a 401(k) plan and a Roth IRA.
Income limits for contributing to a traditional IRA and a 401(k)
The below table outlines the IRS limits for deducting your contribution to a traditional IRA if you or your spouse are covered by a retirement plan at work.
Filing status
2023 traditional IRA income limit
2024 traditional IRA income limit
Deduction limit
Single or head of household (and covered by retirement plan at work)
$73,000 or less.
$77,000 or less.
Full deduction.
More than $73,000, but less than $83,000.
More than $77,000, but less than $87,000.
Partial deduction.
$83,000 or more.
$87,000 or more.
No deduction.
Married filing jointly (and covered by retirement plan at work)
$116,000 or less.
$123,000 or less.
Full deduction.
More than $116,000, but less than $136,000.
More than $123,000, but less than $143,000.
Partial deduction.
$136,000 or more.
$143,000 or more.
No deduction.
Married filing jointly (spouse covered by retirement plan at work)
$218,000 or less.
$230,000 or less.
Full deduction.
More than $218,000, but less than $228,000.
More than $230,000, but less than $240,000.
Partial deduction.
$228,000 or more.
$240,000 or more.
No deduction.
Married filing separately (you or spouse covered by retirement plan at work)
Less than $10,000.
Less than $10,000.
Partial deduction.
$10,000 or more.
$10,000 or more.
No deduction.
» Ready to decide? Check out all of our picks for the best IRA accounts.
How do I choose between an IRA and a 401(k)
If you have a 401(k) at work, you may be trying to figure out if it makes sense to also open up an IRA. Here’s one way to approach deciding between a 401(k) and an IRA, assuming you can’t max out both:
If your employer offers a 401(k) match, consider contributing enough to get all of that free money.
Once you’re set up to get the full match in your 401(k), next consider contributing to an IRA. If you’re eligible for the tax deduction, a traditional IRA can offer a lot of benefits beyond that tax break, including access to low-cost investments and low or no administrative fees. A Roth IRA is another option.
If you’re not eligible to claim the traditional IRA tax deduction or a Roth isn’t right for you, then sticking with your 401(k) might make the most sense.
» Still not sure? Read our road map for choosing between an IRA vs. 401(k).
a 401(k) Both 401(k)s and IRAs — including Roth IRAs — have valuable tax benefits, and you can often contribute to both types of accounts. The contribution limit for 401(k)s is $23,000 in 2024 ($30,500 for those age 50 or older). The limit for IRAs is $7,000 in 2024 ($8,000 if age 50 or older).
Yes, you can have both accounts and many people do. The traditional individual retirement account (IRA) and 401(k) provide the benefit of tax-deferred savings for retirement. Depending on your tax situation, you may also be able to receive a tax deduction for the amount you contribute to a 401(k) and IRA each tax year.
You can invest in both accounts up to annual IRS limits. For 2024, the maximum is $23,000 for a 401(k) and $7,000 for an IRA. Depending on your age and income, your Roth IRA limit may differ.
Since a 401(k) may not be sufficient for your retirement, building in other provisions is essential such as making separate, regular contributions to a traditional or Roth IRA. It's always a good idea to have more options when you reach the "distribution" phase of your life.
There are three main reasons to consolidate your accounts: lower fees, less legwork, and it's easier for your beneficiaries. Fewer fees. Retirement accounts often come with management fees such as annual fees or fees for paper statements, etc.
Highlights of changes for 2024. The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan is increased to $23,000, up from $22,500. The limit on annual contributions to an IRA increased to $7,000, up from $6,500.
The simple answer is yes, you can. However, there are some caveats when it comes to deducting your IRA contributions if you participate in both types of plans. Fortunately for your retirement nest egg, you can contribute to both types of retirement accounts.
In 2022, 15% of retirement plan participants saved the highest amount of $20,500 for that year, or $27,000 for those age 50 and older, according to Vanguard research.
For 2022, 2021, 2020 and 2019, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:$6,000 ($7,000 if you're age 50 or older), or. If less, your taxable compensation for the year.
Just remember that IRAs have an annual contribution limit of $7,000 in 2024 ($8,000 if age 50 or older), but you don't have to contribute that much. When it comes to retirement, starting with any amount early on is better than nothing. What's more, you don't have to fund it all at once.
You can contribute to a Roth IRA if your Adjusted Gross Income (AGI) is: Less than $153,000 (single filer) 2023 tax year. Less than $228,000 (joint filer) 2023 tax year. Less than $161,000 (single filer) 2024 tax year.
Any Traditional 401(k) assets that are rolled into a Roth IRA are subject to taxes at the time of conversion. You may pay annual fees or other fees for maintaining your Roth IRA at some companies, or you may face higher investing fees, pricing, and expenses than you did with your 401(k).
Some folks will need $10 million to have the kind of retirement lifestyle they've always dreamed about. Others can comfortably live out their golden years with a $1 million nest egg. There's no right or wrong answer here—it all depends on how you want to live in retirement!
What are the average and median retirement savings? The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000. Taken on their own, those numbers aren't incredibly helpful.
Though you may not be able to claim a tax deduction on all your contributions, you can max out each type of account in the same tax year. Plus, the IRS permits those who are at least 50 years old to make additional “catch-up” contributions into each account.
You can't contribute to a SIMPLE IRA plan for any calendar year in which an employee either: receives an allocation of contributions in a defined contribution plan, such as a 401(k), profit-sharing, money purchase, 403(b) or SARSEP plan; or.
Yes, you can but it's important to be aware that if you do roll pre-tax 401(k) funds into a traditional IRA, you may not be able to roll those funds back into an employer-sponsored retirement plan. Contact your tax advisor for more information.
Anyone eligible can contribute to an employer's 401(k), but income limits apply to Roth IRAs. Since both accounts have annual contribution limits and potentially different tax benefits, contributing to both could boost your annual savings amount and potentially reduce your tax bill, now and down the road.
A 401(k) can count as savings in a 50/30/20 budget plan. But if 401(k) contributions are automatically deducted from your paycheck, they're not included in your take-home pay calculation.
Introduction: My name is Tish Haag, I am a excited, delightful, curious, beautiful, agreeable, enchanting, fancy person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
