I contribute to a 401K. Can I at the same time open and contribute to an IRA. If so would it be "foolish"?
You can contribute to both a 401k and an IRA. It is Foolish to do so. If you can max out both, do so. Certainly, contribute enough to your 401k to collect all of the employer match. Best wishes, Chris
I believe that you can contribute to a 401k at the same time as a Roth IRA, but not a traditional IRA. They'll only let you reduce your taxable income so much. --prs183s
I believe that you can contribute to a 401k at the same time as a Roth IRA, but not a traditional IRA. They'll only let you reduce your taxable income so much. That's incorrect. If you still have income after the 401k the IRA is still available. But I'd do a Roth instead.
I believe that you can contribute to a 401k at the same time as a Roth IRA, but not a traditional IRA.Actually, anyone with earned income can contribute to a Traditional IRA. However, the difference that being eligible to contribute to a qualified plan (401(k) or 403(b)) is that it greatly reduces the cutoff amount of one's modified AGI at which one can deduct contributions to a Traditional IRA.Generally, if one is not eligible to deduct contributions to a Traditional IRA, but one qualifies to contribute to a Roth IRA, the Roth IRA makes far more sense than non-deductable contributions to a Traditional IRA.
Thanks for the clarification.
It actually makes sense to have both by the time you retire.The 401k or traditional IRA withdrawals are taxable when withdrawn. So think of them as being used to pay the major itemized deductions in retirement years, such as medical insurance/expenses (which are major items for retirees), property taxes, etc.The nontaxable Roth withdrawals - match them up with the nontaxable exepnses - food, clothing, utilities, etc.See how your projected benefits add up. You may want to reallocate how much you put in each pot of retirement money.Properly allocated between taxable and nontaxable sources, your retirement benefits can be more than you think. By combining taxable and tax-free benefits it's possible that $30,000 in total Roth and 401k withdrawals can be as much $50,000 if it all came from a taxable IRA or 401k account.Social security is kind of a wild card. It may or may not be taxable, and taxed at 0, 50% or 85% or points in between.The best method, I've heard:1. First put enough in your 401k to get the employer match. E.g., if you need a 6%-of-pay contribution to get a 3% employer match, do the 6% of pay first.2. Then put $2,000 in a Roth IRA, assuming you are eligible. If not, probably do the nondeductible trad. IRA, or maybe a tax-deferred annuity. But watch the terms and costs on a TDA.3. With additional amounts available, probably put it in the 401k.Good luckWRA
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