Employees may not make regular IRA contributions to their SIMPLE IRA account?

Question

I read this on-line and it doesn't make any sense to me. Is this just completely wrong or am I just not understanding what I'm reading?

This was on wikipedia.com for information on Simple IRA accounts.

Answer 1

Hi I think I can clear this up for you.  A Simple IRA is similar to a 401k retirement plan i.e., it is a qualified retirement plan sponsored by your employer.  

Your contributions to these accounts are only made from payroll deductions  (salary reduction) with pre-tax money.  This is a benefit to you to defer taxes until later e.g., after 59 1/2.

What the statement above says is you cannot make a direct contribution to your SIMPLE IRA and consider it as a contribution to a regular IRA.  A regular IRA is the original version IRA which became law in 1974 it is also called the traditional IRA.  You can make contributions to this type of account as long as you have earned income.  This year you can contribute up to $5,000 or $6,000 if you are 50 or older.  Contributions to a regular IRA are deductible if you are not covered by a qualified plan during the tax year.  If you have a qualified plan at work but, don't participate you still cannot deduct your regular IRA contribution.