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Are you allowed to have both a 401(k) and a SIMPLE IRA? And what would the limits be on the combined total?

I have two employers but I am maxed out at one. My understanding is that I can't use a SIMPLE at the other - is this true? (The other is a small business I run.)

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    Can you tell us more about your situation? Do you have two employers? – myron-semack May 28 '10 at 16:06
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I am not 100% sure, but I think the answer is this: You can't max out both. You could theoretically max out the SIMPLE IRA ($11,500) and then contribute $4,000 to your 401k, but your total can't exceed the 401k limit of $16,500. This also means you could max out your 401k at $16,500, but you couldn't contribute anything to the SIMPLE IRA. Note that no matter what, you can't contribute more than $11,500 to your SIMPLE IRA.

(Note that this is all independent from your Traditional or Roth IRA, which are subject to their own limits, and not affected by your participation in employer-sponsored plans.)

As I understand it, a 401k and a SIMPLE IRA both fall under the umbrella of "employer-sponsored plans". Just like you can't max out two 401k's at two different employers, you can't do it with the 401k and the SIMPLE IRA. The only weird thing is the contribution limit differences between SIMPLE IRA and 401k, but I don't think the IRS could/would penalize you for working two jobs (enforcing the lower SIMPLE IRA limit for all employer-sponsored retirement accounts).

You should probably run the numbers, factoring in the employer match, and figure out which account-contribution scenario makes the most financial sense for you. However, I'm not sure how the employer match helps you when you're talking about a small business that you own/run. You may also want to look at how the employer match of the SIMPLE IRA affects the taxes your business pays.

Disclaimer #1: I couldn't find a definitive answer on your specific scenario at irs.gov. I pieced the above info from a few different "SIMPLE IRA info" sites. That's why I'm not 100% sure. It seems intuitively correct to me, though. Does your small business have an accountant? Maybe you should talk to him/her.

Disclaimer #2: The $ amounts listed above are based on the IRS 2010 limits.

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