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IRAs and Roth IRAs
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401 contribution between jobs and IRA

I was contributing (Max) to my previous employers 401 (TSP) account with employers matching contributions.

I have left that job since Mar 09, and I am not eligible for retirement plan at my new employer till Mar 10.

What is the best I could do in this situation to maximize my retirement. Does this mean I will lose a years contribution? Is IRA the only option? What would be the max I could save this year (AGI over 250,000).

Thanks for your reply


Zip Code: 78230

Re: 401 contribution between jobs and IRA

When you work for an employer, the amount you can contribute to that employer's retirement plan is a function of the plan in place. If there is a one-year waiting period at your new job, then unfortunately, you can't contribute any money into that employer's retirement plan.

Whenever I find out that one of my clients is going to switch jobs, I try to remind that person to max out their salary deferrals before they leave the first job, since many employers require a one-year waiting period prior to becoming eligible to participate in their retirement plan.

If you have some independent contractor income, you have the option of setting up a self-employed retirement plan. At this point, you could either set up a SEP IRA or a Solo 401k. While the Solo 401k would need to be set up by 12/31, you have all the way until 4/15 (10/15 if you go on extension) to set up a SEP.

You also have the option to contribute to an IRA, and put away $5k. You have until 4/15/10 to make an IRA contribution for 2009. This contribution won't be deductible to you, but depending on your other retirement accounts, you might benefit by converting that IRA to a Roth IRA in 2010.

We wrote about both these strategies a lot on MDTAXES, and you can find a directory of all of our articles at www.mdtaxes.com/oldnews.html.

Zip Code: 01801