Can I Fund an IRA if I Have a 403b?

Roth IRA Requirements

Having a 403b plan does not affect your Roth IRA contributions for the year. Roth IRA eligibility depends solely on your modified adjusted gross income, assuming you have earned income equal to or greater than the amount you contribute. If your modified adjusted gross income falls below the annual limits, based on your federal filing status, you can contribute to a Roth IRA as well as your 403b plan.

You can contribute to a traditional IRA as long as you have earned income equal to or exceeding your contribution, and you will not reach age 70 1/2 during the year, regardless of whether you have a 403b plan or not. However, if you have a 403b plan, you may not be able to deduct your contributions to your traditional IRA from your taxable income if your modified adjusted gross income exceeds the annual limits for your federal filing status. The IRS limits on deductible contributions to traditional IRAs apply to anyone covered by an employer sponsored plan, and 403b plans are considered employer sponsored.

The modified adjusted gross income (MAGI) limits change with inflation. As of 2011, if you are covered by a retirement plan at work, your deduction decreases if your MAGI falls between $56,000 and $66,000 if you are single; $90,000 and $110,000 if you are married filing jointly and $0 and $10,000 if you are married filing separately. If your spouse is covered by a retirement plan at work, but you are not, your deduction decreases if your MAGI falls between $169,000 and $179,000 if you file a joint return, or $0 and $10,000, if you file a separate return.Within these ranges, your deduction is gradually phased out, dropping to zero when you hit the maximum amount.

Just because you cannot deduct your contributions does not mean you should not consider making a traditional IRA contribution.The money in your IRA still grows tax-deferred, which accelerates your returns. In addition, when you take a withdrawal from the account, the portion of the withdrawal originating from your nondeductible contributions does not count as taxable income.