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Contributing to More Than One Retirement Plan for the Year

contribute to more than one retirement plan in one yearWhile many Americans aren't saving enough for retirement, there are others who are saving a lot (true story). In fact, some of you have asked whether it's possible to contribute to more than one retirement plan for the same year. The answer is generally yes, but there are certain traps you need to be aware of before jumping in to the savings game feet first.

If you are making an IRA contribution for 2013, the maximum contribution you can make is $5,500 (or $6,500 if you’re age 50 or older this year). This limit applies to both IRAs and Roth IRAs. Although you can contribute to both an IRA and Roth IRA, the combined limit is $5,500 or $6,500 depending on your age. You can’t contribute the maximum to both an IRA and a Roth IRA. For example, if you are age 50 or older this year, the maximum combined IRA and Roth IRA contribution you can make is $6,500. You could choose to make a $3,000 contribution to your IRA and the remaining $3,500 to a Roth IRA. As long as you don’t exceed your $6,500 limit, you can split the IRA contribution any way you want.

If you also participate in a retirement plan with your employer that allows you to make salary deferral contributions, you can do that in addition to your IRA contributions. For example, if you participate in your employer’s 401(k) plan for the year, the maximum amount you can defer is $17,500 if you are under age 50. If you’re age 50 or older, the maximum deferral is $5,500 more, for a total of $23,000 for the year. The IRS calls this the “annual deferral limit.” Note that your plan may set a lower dollar limit.

If you happen to participate in more than one employer retirement plan during the year, the annual limit must be combined for plans such as 401(k)s, SIMPLE IRAs, and 403(b)s. The annual limit applies no matter how many plans you participate in during the year. So, if you switched jobs during the year, and participated in more than one plan, you have to keep track of the annual deferral limit to make sure you don’t exceed the limit. If you do exceed the annual deferral limit, you will have to remove the excess and the interest it earned from the plan by April 15th to avoid tax problems.

-By Joe Cicchinelli and Jared Trexler


Great article! To this I would add that I was meeting with a couple and they had a complaint. The complaint was that they were maxing out their 401k contributions but made too much to deduct their IRA contributions. This also meant they were making too much to fund Roth IRAs.

I asked if they had any Traditional or Rollover IRA accounts - they said no, zero of those.

I informed them this was great! They could fully fund into non-deductible IRAs an additional $6,500 each in 20113 as they are over age 50. Then right after they funded the non-deductible IRAs they could convert them to Roth! I call this a super nice backdoor to a Roth IRA!

They were shocked that they had never heard of such an option. How many years of Roth IRAs could they have been funding...

https://www.irahelp.com/2013 - for more information on funding limits.

In a situation like that, the only other "deferral" option is an annuity.

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