If your employer provides a pension plan that doesn't prohibit you from setting aside additional money for your retirement in an individual retirement account, or IRA. Your annual salary and your filing status determine how much the Internal Revenue Service allows you to contribute tax-deferred to your IRA. You can still contribute above this limit to a regular IRA, but you won't be able to deduct these contributions from your taxes.
Traditional IRA Limits
The maximum allowable tax-exempt contribution to an IRA is $5,000 a year for people under 50, or $6,000 if you will be 50 or older in the year you make your contribution. As of 2011, if you are covered by a pension at work, you can contribute this full amount if you earn less than $56,000 as a single person or less than $90,000 as a married couple filing a joint return. If you earn more than $56,000 but less than $66,000 as a single person or more than $90,000 but less than $110,000 married filing a joint tax return, you'll only be allowed to contribute a percentage of this amount tax-free, depending on your filing status and income level.
Because you pay taxes on contributions to a Roth IRA in the year in which you make the contributions, you don't have to worry about the amount of tax exempt contributions. But IRS rules still limit the amount you can contribute to a Roth to $5,000 a year if you're younger than 50 and $6,000 for those 50 and older. If you have a pension with your employer, you'll need to figure your modified adjusted gross income to determine if you can contribute this full amount to your Roth IRA. As of 2010, if you earned less than $167,000 as a married person filing jointly, you could contribute the full amount to your Roth IRA even if you're covered by a pension at work.
The IRS considers you covered by your employer's pension plan even if you aren't yet vested in the plan or if you decide not to contribute to the plan. If you're married and you aren't covered by a pension with your employer, but your spouse has a pension with his employer, the total amount of income you both earn determines your limits for tax deductible contributions to your IRA. In order to contribute to an IRA, you must earn wages at least equal to the amount you contributed to your IRA.
You may contribute to both a Roth and a traditional IRA if you also have a pension through your employer, but the total amount of your contributions to these retirement accounts can't exceed the maximum allowed by the IRS. The IRS establishes the rules for contributions to IRAs. These rules can change from year to year. Consult the IRS or your tax professional to determine the rules for your tax year.
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