I screwed the pooch last year. My goal was to max out my 401k and hit the IRS limit. The catch is I also wanted to maximize my employer match. Since the match is computed off each paycheck, I had to stretch the installments out over the entire year. Unfortunately I misunderstood the IRS max. I understood the max ($17,500 for last year) to include both my contributions and the employer match. I now know this to not be the case.
I figure I left about $7,800 worth of potential tax shelter and retirement savings on the table. Instead I put that into taxable savings.
To add insult to injury, I am pretty sure that $7800 would have brought me under the income limits for a Roth IRA. I'm still trying to compute my overall adjusted gross income, but at this point it looks like I am deep into the phase out, if not totally ineligible to do a roth this year.
Does anyone have any ideas for options? I have about $10k of cash savings I'd love to plug into a tax deferred retirement account.
I am covered by a workplace 401k and my income is WELL over the regular IRA limits to deduct. I believe I can contribute to an IRA, but not deduct those contributions.
One idea I had was to drop $5500 of the taxed savings I have into an IRA and immediately convert it to a Roth IRA. Unfortunately I also have a sizable rollover or conduit IRA that came from an old 401k. To avoid paying tax, I believe I would first need to zero out the conduit IRA by rolling it into my current 401k. Otherwise I would have a mix of pre and post-tax IRA money and the roth conversion would be ugly. That would at least be something.
At this point I'm thinking I should just call it a learning experience and not make that mistake again. I've already adjusted my 401k contribs to max out at the full $18,000 this year.