Feb
6
I have a fulltime job, and also am an independent contractor. I usually contribute 4k annual to my traditional IRA to get the tax write-off. I heard there are some limitations if you make more than a 100k annual.
Roth IRA, Traditional IRA, 401K
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The IRA limit is $4000 for this year, $5000 for next year for people under the age of 50 (and $5000 and $6000 respectively if you are 51 and up.) The salary cut-off determines if you are elligible for a Roth IRA- you can get one if you make less than $114,000 single, $166,000 for married filing jointly. Anyone can set up a regular IRA, but you may not be elligible to take a tax deduction on your contributions. Here are some basics:
-if you don’t have a 401(k) you can deduct your IRA contribution no matter what
-if you are single and do have a 401(k) at work, you can only take the deduction if you make less than $60,000 per year
Now, that is for people who are single- if you have a spouse, it will depend on whether or not they are offered a retirement plan (are we confused yet?) for the tax write-off.
There is a new law going into effect in 2010 that will let you convert a regular IRA to a Roth IRA- you would have to pay tax on your initial investment if you wrote it off before, which is a bummer, but you would have the awesome tax savings of a Roth IRA. So that is something to think about in a few years!
The contribution limit for 2007 for 401(k)’s is $15,500 if you are younger than 50 and $20,500 if you are older than 50. Nothing prevents you from fully funding both an IRA and a 401(k).
I hope that helps!
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