30 Dec Can I save in an IRA if I have a Solo 401(k)?

Q. IRS Publication 560 says contributions to a SEP or a SIMPLE IRA “won’t affect the amount an individual can contribute to a Roth or traditional IRA.” Is that also true for sole proprietor contributions to an individual 401(k)? Publication 560 is silent on that issue.
— Investor

A. We’re glad you want to make sure you’re eligible for more contributions before you make them. Paying a penalty is never fun.

The answer? It depends.

If you have a 401(k) plan, including a Solo 401(k) plan, there are limits on contributions to a Roth and traditional IRAs, said Kenneth Bagner, a certified public accountant with Sobel and Co. in Livingston.

If your spouse also has access to a 401(k) plan, the limits become more restrictive, Bagner said.

“If you are the only one working and have ample income, you may be able to contribute on behalf of your spouse to their IRA but you will be restricted if over the income limits,” he said.

This IRS chart shows the Roth IRA income and contribution limits for 2022 and 2023, and how much you can contribute based on your modified adjusted gross income (MAGI):

This IRS chart shows the traditional IRA deduction limits 2022 and 2023 if you or your spouse have an existing retirement plan at work:

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This story was originally published on Dec. 30, 2022.

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