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I am looking into IRAs, and I'm reading that you can only invest up to $5,000 into an IRA this year.

Actually, unless you are 50 or older by the end of 2007, the limit for 2007 is $4000. If you are 50 or older by the end of 2007, then you can add an additional $1000 for a total of $5000.

In 2008, the limits will rise to $5000 for people younger than 50 and $6000 for people 50 or older. Thereafter, the limits are indexed to inflation.

I currently have a 401k. Does this $5,000 incorporate both funds, or is the IRA and the 401K separate entities of themselves?

They are seperate. 401(k) employee contribution limits for 2007 are $15,500 if younger than 50, $20,500 if 50 or older. These limits are indexed to inflation.

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