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Greetings, Whineluvr, and welcome. You asked:

I am 28 and I have been in my current position for 14 months and participating in my company's 401k since January. In addition, I have a regular IRA mutual fund account with Berger that has a balance of about $2000. My questions are:

1)Can I make contributions to both the IRA and the 401k? Someone told me that it is illegal to keep funding an IRA when you have a 401k. Is this true?


No, it is not true. Regardless of your participation in a retirement plan through work, you may always make a contribution to an IRA. It may or may not be deductible from your taxes based on your filing status and adjusted gross income, but you may still contribute up to $2K per year as long as you have earned compensation and are younger than age 70 1/2. For more information on IRAs, see my Foolish Retirement Plan Primer at http://www.fool.com/retirement .

2)I feel that the 401k plan that my company is with, in a word, sucks. I am now contributing 6% of my gross salary to it but I think that I should reduce that to the company match of 3% and use the remaining 3% in alternative investments. Am I restricted as to the kinds of investments I can make?

Definitely contribute enough to get all of the free money available through your employer's match that you can. Beyond that, you might do better elsewhere provided you are disciplined enough to continue making those deposits and to increase them through the years as your pay increases. You must evaluate your alternatives against the 401k to see if they will result in more money in your pocket after you retire. One way to that is outlined in Step 4 of my 13 Steps to Foolish Retirement Planning at http://www.fool.com/Retirement/Retirement.htm .

Regards….Pixy
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