Modified AGI limit for traditional IRA contributions increased. For 2018, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:
More than $101,000 but less than $121,000 for a married couple filing a joint return or a qualifying widow(er),
More than $63,000 but less than $73,000 for a single individual or head of household, or
Less than $10,000 for a married individual filing a separate return.
Modified AGI limit for Roth IRA contributions increased. For 2018, your Roth IRA contribution limit is reduced (phased out) in the following situations.
Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $189,000. You can’t make a Roth IRA contribution if your modified AGI is $199,000 or more.
Your filing status is single, head of household, or married filing separately and you didn’t live with your spouse at any time in 2018 and your modified AGI is at least $120,000. You can’t make a Roth IRA contribution if your modified AGI is $135,000 or more.
Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than zero. You can’t make a Roth IRA contribution if your modified AGI is $10,000 or more.
So, for an individual, if MAGI is < $63,000 you can invest in a tIRA and take the full deduction, phases out at $73,000
If Married filing jointly, if MAGI < $101,000 you can invest in a tIRA and take the full deduction, phases out at $121,000
So, for an individual, if MAGI < $120,000 ROTH is available, phases out at $135,000
If Married filing jointly, if MAGI < $189,000 ROTH is available, phases out at $199,000
I am 89% sure that both these co-workers would qualify for the ROTH under these guidelines in addition to maxing out the 401k.
Meaning that they could contribute the full 18.5k in the 401k, and an additional 5.5k to a ROTH IRA.
tIRA is probably out of the question, but it has nothing to do with the 401k limit as suggested by the Banker.
The goal of both these individuals is to reduce tax liability. I cannot imagine a scenario where not maxing or contributing to the 401k would improve things.
Also probably need to re-characterize my tIRA contributions to a ROTH now that DW is working full time! Oops!
Thanks for the link - I had read that before, but didn't take the "if you are covered by a retirement plan at work" quote as saying "in addition to the limits of your 401k" - but I suppose that is what they are getting at. I was hoping there was something that said this explicitly...