401K and Roth IRA?

Hi Terry,

I am over 50 and have already hit my max + catch up contribution of $23,000 for 2014. Are there any other investments (Roth IRA perhaps?) that can help reduce my tax debt for this year?

Thank you!

Terry Says:  Food for you!  Yes, you can have both a 40l(k) AND a Roth IRA in the same year — BUT ONLY if you qualify based on “earned” income (which excludes income from interest, rents, etc.)

Here are the basic guidelines for 2014 Roth Income Limits:

• Single or head of household: you must earn less than $114,000 to fully contribute to a Roth IRA
• Married filing jointly or a qualified widow(er): you must earn less than $181,000 to fully contribute to a Roth IRA
• Married filing separately: you must earn less than $10,000 to fully contribute to a Roth IRA. (Note: Married filing separately can use the limits for single people if they have not lived with their spouse in the past year).

Above those levels the amount you can contribute phases out.

If you under the age of 50 years old you can contribute $5,500 toward retirement in a Roth IRA. If you are married each individual can set aside $5,500 toward their retirement, even if only one partner works.

If you are age 50 or older the same $5,500 contribution limit applies. However, you are also allowed to contribute an additional $1,000 as a “catch up” contribution toward retirement, for a total of a $6,500 contribution.

This was a column about getting tax deductions, and as you must know you don’t get a deduction for a Roth IRA contribution.  But the money grows tax-free and doesn’t have to be withdrawn starting at age 70-1/2.