Super, over-achieving savers often run into questions about their ability to contribute to multiple tax-advantaged retirement accounts. Here’s a recent question from a reader:
I have a traditional IRA and a Roth IRA. I make under $50K a year. According to your article I need to split the $5,000 max contribution amount between those accounts (i.e. I cannot contribute $5,000 to each account). Is that correct?
My answer: Yes, $5,000 is as much as you can contribute, combined, to both accounts. You are correct that you cannot contribute $5,000 to each.
With so many different types of accounts and possible combinations, I thought it might be helpful to have one page that answers many of these “can I contribute to both” questions.
You’ll notice that in all cases you can contribute to both accounts. The question becomes: how is your annual contribution limited?
Traditional IRA and a Roth IRA? Yes, as long as you keep your combined contribution within the annual maximum contribution limit and meet the income requirements you can contribute to both accounts.
401K and a Roth IRA? Yes, there is absolutely no conflict with these two accounts. Like the Traditional IRA and Roth IRA, the 401K and Roth IRA have almost opposite tax treatments, so the IRS lets you participate in both as long as you meet the income requirements. As a bonus, these accounts have separate annual maximum contribution limits.
Traditional IRA and a 401K? Yes, but there are strict income requirements that make it difficult for middle to high income earners to take advantage of both accounts. These accounts also have separate annual maximum contribution limits. Note that you can always make non-deductible contributions to your Traditional IRA regardless of your income or participation in a 401K.
401K and a Roth 401K? Yes, and this is highly recommended. By contributing to both you add tax treatment diversity to your retirement savings (the 401K is taxed in retirement, while the Roth IRA is taxed upfront). These accounts also have separate annual maximum contribution limits.
401K and a 403B? Yes, but your annual maximum contribution limits are combined. So if you’ve already contributed the maximum to your 401K, you can’t make tax-deductible contributions to your 403B.
401K and a 457? Yes, and these accounts have separate annual maximum contribution limits. If you have access to both of these accounts then you’ve got a huge tax advantaged savings opportunity available to you.
Roth IRA #1 and a Roth IRA #2? Yes, you can have multiple Roth IRAs, but your annual maximum contribution limits are combined.
Okay, this list is getting a little out of hand, so I’m going to switch to a chart to include more accounts and to keep things simple:
Can I Contribute to Both…
|401K||IRA||Roth IRA||403B||TSP||457||SEP IRA||SIMPLE IRA||Solo 401K||Roth 401K|
- Yes – You are free to contribute to both accounts provided you meet income limits. There are no limitations other than annual maximum contribution limits, which are NOT shared.
- Shared – You are free to contribute to both accounts provided you meet income limits. There are no limitations other than annual maximum contribution limits, but they ARE shared across the accounts.
- Limited – You are free to contribute to both accounts provided you meet income limits. However, there are special income limitations that further limit your ability to contribute to both accounts.
As you can see there are lots of opportunities to save in a tax-advantaged way. Are you saving for retirement using one or more of these accounts? I hope so.
As always, be sure to do your own research before investing.
Help me improve this resource. Did I leave any combinations off the list?