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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Re: 401k plus Roth IRA Date: 8/27/1998 8:07 AM
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Greetings, Cjones38, and welcome. You asked:

My son and daughter are both maxed out on their 401k's at 15%. Both are single and earn $45K - $50k a year. My question is can they also start and contribute to a Roth IRA? If so, how much a year.

Yes they can at a maximum, nondeductible contribution of $2K per year. See my Foolish Retirement Plan Primer at http://www.fool.com/Retirement/Retirement.htm for the details.

I figure they contribute between $7000 - $7500 a year to their 401k. One has 3% matching employer contributions. The other does not (contractual Teamster). The UPS teamster plan allows them to also contribute non-deductable monies. Is this like a Roth IRA? Thanks for any info.

No, it's not like a Roth IRA except in the sense that the initial contribution is not tax deductible and all earnings are allowed to accumulate untaxed within the account. The difference is the earnings in the 401k will be taxed when they are withdrawn many years hence. If the owner is over age 59 ½ and if the Roth has been open for at least five tax-years, those earnings will not be taxed on withdrawal from the Roth.

Regards…..Pixy

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