Pension and IRA.

February 3, 2020 9:34 AM

USA tax filter: Do pension contributions count towards the IRA contribution limit?

This seems like such a straightforward question and yet I cannot find an answer anywhere. I work for a public agency with a pension program. The pension program requires pre-tax contribution (reported in box 14, 414h on a w2). Mr. Millipede and I want to max out our IRA contributions on top of this. My question is whether the pension contributions count towards the annual limit we can put in our IRA. Dooooo they?

posted by millipede to Work & Money (4 answers total)

IRA FAQs - Contributions

Can I contribute to a traditional or Roth IRA if I’m covered by a retirement plan at work?
Yes, you can contribute to a traditional and/or Roth IRA even if you participate in an employer-sponsored retirement plan (including a SEP or SIMPLE IRA plan). See the discussion of IRA Contribution Limits. If you or your spouse is covered by an employer-sponsored retirement plan and your income exceeds certain levels, you may not be able to deduct your entire contribution. See the discussion of IRA deduction limits

posted by the man of twists and turns at 9:39 AM on February 3, 2020

No. Your pension (or 401k or 403b or other workplace plan) limit is independent of your IRA limit.
posted by Dashy at 9:44 AM on February 3, 2020

You can contribute, but as the quoted FAQ says, you may not be able to deduct the contribution (and most people who are in a position to max out their 401(k) can't - it phases out from $104,000 to $124,000 for a couple). And nondeductible IRAs are not generally beneficial. You may want to consider a backdoor Roth.
posted by Mr.Know-it-some at 11:57 AM on February 3, 2020 [1 favorite]

Depending on how much money you're making, you may not need to backdoor anything. The income limit for contributing to a Roth at all is meaningfully higher (like, $30K for individuals) than for making a deductible contribution to a traditional IRA.
posted by praemunire at 12:37 PM on February 3, 2020 [2 favorites]