Dan,

I see your question as whether you can contribute to both an IRA and 401k at the same time. Yes, but your contributions to the IRA are likely not deductible and perhaps not eligible for Roth treatment either. If you or your spouse accrued any benefits in a 401k plan (or other tax-qualified plan) and your income before standard and itemized deductions and before personal exemptions are subtracted exceeds certain levels ($85,000 for married filing jointly in 2008 (and limited if from $85,001-$105,000)), then you cannot tax-deduct contributions to an IRA.

Generally, a contribution to a Roth IRA is allowed for those who are married filing jointly with such joint income below $156,000 (and limited if from $156,001-$166,000). This is so regardless of whether the individual or spouse also benefits under a 401k or other qualified plan.

If your married filing jointly income exceeds $166,000, is there any benefit to making a non-deductible, non-Roth contribution to an IRA? Yes, but is is severely limited. The investment earnings on such amounts grow tax deferred. When you later make withdrawals, you'll only be taxed on the proportion of the withdrawal that the earnings have been to date to the total.

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