SIE Exam Question 730: Answer and Explanation

Question: 730

Justin, age 58, contributes to his employer's 401(k). In 2021, he will contribute $25,000 to the plan through salary deferrals, and he would like to contribute to an IRA as well. If he is single and has an income of $250,000, the maximum IRA contribution that he can make is:

• A. $6,000 to a deductible IRA.
• B. $7,000 to a deductible IRA.
• C. $7,000 to a non-deductible IRA.
• D. $7,000 to a Roth IRA.

Correct Answer: C

Explanation:

Because Justin is an active participant in an employer-sponsored retirement plan, he is subject to an AGI phaseout of $66,000 to $76,000 in 2021. Because his income is above the phaseout range, he is not eligible to make a deductible IRA contribution. His AGI is too high to contribute to a Roth IRA, as well. The Roth IRA AGI phaseout is $125,000 to $140,000 in 2021.