Contributions to a traditional IRA are usually tax-deductible. However, if you're covered by a 401 (k) plan or any other employer-sponsored plan, your modified adjusted gross income (MAGI) will determine how much of your contribution you can deduct, if any. Contribution limits are not reduced to a Roth or traditional IRA based on participation in the 401 (k) plan. However, they are reduced for Roth IRAs (not traditional IRAs) based on profits (not participation in the 401 (k)).
It allows an employed spouse to contribute to an IRA for a non-working spouse and up to double the family's retirement savings. However, your ability to deduct taxes for your IRA may be limited, depending on factors such as your income and whether your spouse is covered by an employer-sponsored retirement plan. You should also calculate how much your excess contributions earned while they were in the IRA and also withdraw that amount from the account. How much you can contribute, or if you can contribute at all, depends on your tax-filing status and your income for the year.
The advantage of having a 401 (k) and a traditional IRA is that you can effectively increase your total contributions to retirement savings, which, in turn, can increase with deferred taxes. That is, a person who cannot contribute to a Roth IRA due to income limits can contribute to a traditional IRA. You may not be able to claim a tax deduction for your traditional IRA contributions if you also have a 401 (k), but that won't affect the amount you can contribute. So, use all available savings and investment mechanisms, including an IRA and your 401 (k), to save as much as you can, as soon as possible while getting the maximum tax relief.
If your 401 (k) plan has limited investment options, consider opening a traditional or a Roth IRA and contributing to the annual maximum. You can divide your contributions between different types of IRAs, such as having a traditional IRA and a Roth IRA. See publication 590-A, Contributions to Individual Retirement Arrangements (IRA), for additional information, including how to declare your IRA contributions on your individual federal income tax return. You may be able to request a deduction on your individual federal income tax return for the amount you contributed to your IRA.
As for contribution limits, not everyone can contribute to a Roth IRA due to the phase-out due to income limits. If you decide to contribute to a traditional IRA and convert it to a Roth IRA, be sure to review your plan with your tax advisor before taking action. However, adding an IRA to your retirement plan after that may provide you with more investment options and possibly lower fees than those charged by your 401 (k).
