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Posted by Barry Margolin on April 15, 2006, 2:59 am
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>>> You seem to be assuming that you have to choose one or the
>>> other, so they should be comparable. But since you can have
>>> *both* a 401k and an IRA, why should they be similar?
> I am referring to traditional IRA, not Roth IRA. My
So am I.
> understanding is that once you contribute with pre-tax money
> to 401K (let's say max out at $15K), you are not eligible
> for contributing pre-tax money to IRA.
But you can still contribute to an IRA, it just won't be
deductible, i.e. it will be post-tax rather than pre-tax.
> However, I think you
> would be allowed to contribute up to $4K to IRA if you elect
> not to participate in 401k.
Actually, the restriction applies if you're covered by a
401K (or some other qualified retirement plan), regardless
of whether you choose to contribute, and only if your income
is above a threshold.
> So if my above interpretation is correct, then traditional
> IRA and 401k are indeed exclusive with pre-tax money.
True, but why should we restrict the discussion to pre-tax?
I contribute to my 401K and also max out my traditional IRA
contribution. In years when I'm eligible I contribute to a
Roth IRA instead of traditional.
--
Barry Margolin, barmar@alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***
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