A podcast listener named Justin says, “I maxed out my 401(k) for 2022 and still have more money to invest. Can I also max out an IRA—and if so, would the contribution also be tax-deductible?”
Justin, thanks for your question, and congratulations on being such a good saver! I’ll answer your question in this post by reviewing the retirement account contribution rules and pitfalls to avoid.
Can you contribute to a 401k and an IRA in the same year?
The short answer to the question is yes; you can contribute to a workplace retirement plan and an IRA (Individual Retirement Account) in the same year. However, having an extra retirement account changes the tax rules and benefits you receive in some cases. So, keep reading to learn how to take advantage of multiple retirement accounts in the same year.
First, let’s touch on why you’d want more than one retirement account. The primary benefits are saving more for retirement and reducing your current or future tax liability. Those are extremely powerful and why I’m a huge fan of tax-advantaged accounts. So, having more than one retirement account can help you build more wealth.
How much can you contribute to retirement accounts?
For 2022, workplace retirement plans, such as a 401(k) or 403(b), allow you to contribute up to $20,500 or $27,000 if you’re over age 50. If you’re like Justin and max one out with cash to spare, saving more in an IRA is a smart move.
For 2022, the IRA contribution limits are much lower than workplace plans at up to $6,000 or $7,000 if you’re over 50. All the limitations I’ve covered apply whether you use a traditional or Roth IRA or account at work.
IRA Contribution Rules When You Have No Income
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