Are after-tax contributions to a Brokerage IRA deductible at end of year?

Hi Steven,

If you don't contribute to the 401K, then you can fully deduct up to $6,000 into your traditional IRA. However - even if you participate in your 401K, you should be able to partially deduct a contribution to your IRA due to your income level. Since you are over 50 you are also eligible for "catch up" contributions above the normal contribution limits for a 401K and/or IRA.

If your employer does 401K matching you may want to consider participating in that program and just parking the money in the safest vehicle they offer since your employer is amplifying your savings. This of course depends on the degree of any matching AND your comfort with the offered investment choices. At 59 1/2 you should be able to rollover any 401K money into an IRA or your company may allow you to rollover money from the 401K into an IRA while you still work there (an in service rollover) - it depends on the plan.

Check out these articles:
http://en.wikipedia.org/wiki/401(k)_IRA_matrix

http://www.schwab.com/public/schwab/research_strategies/market_insight/retirement_strategies/planning/saving_for_retirement_ira_vs_401k.html

http://www.accumulatingmoney.com/can-i-rollover-my-401k-while-still-employed/

That's what I thought, then this morning I read the IRS Pub 590 regarding IRA's and it seems to me to say the exact opposite of SilverSurfer's answer.

It says that my employer's 401k is a "defined benefit plan" (it is a "variable annuity" plan) and therefore whether I participate in it or not, the mere fact that I am "eligible" to participate effectively means I am participating as far as the IRS rules go. And no, there are zero employer contributions, 100% by employee.

Worse, Pub 590 gives income amounts which say there is zero partial deduction. No income tax deductions are allowed at my income level.

Please advise.

stevenjs

Hi Steven,

A 401K is a "defined contribution plan" vs " defined benefit plan" http://en.wikipedia.org/wiki/Pension

If your company's retirement plan is not a 401K, but is instead a defined benefit plan you may be correct - but you should clarify that with your company.

At this point you may want to call the IRS and talk to them directly about your situation: http://www.irs.gov/contact/index.html

We are not financial advisers and can't provide advice.

Thank you. The idiot on the phone no speakee English and said "defined benefit" when "defined contribution" was intended.

so, I definitely have a 401k defined contribution plan, and the stuff I read in the IRS Pub regarding "defined benefit plans" does NOT pertain to me.

So, it seems your first answer would be right IF:

I am not "covered by an Employer Plan" as defined by the IRS.

And apparently, no one can answer this question, which is trickier than it seems, except the Plan Administrator at the company.

Again, thanks for your help.