No. of Recommendations: 0
Hello,

My fiance and I are starting our retirement savings plan, but are unsure about some things. Our mutual employer offers a 401K plan to which we each contribute 10% of our income. I gather this is almost certainly a good thing to do. In addition, we contribute 10% to our employer's stock participation plan (which guarantees an instant 15% return). However we are looking at a target of 40% pre-tax savings and this leaves us with about $20,000 left to do something with.

Ideally, of course, we would like to invest in the stock market in some sort of tax-deferred manner or with tax-free earnings. Given that we are participating in the 401K plan, can we also open an IRA account? What is the maximum each of us can contribute to this on a yearly basis?

Is it possible to open both an IRA and a Roth IRA, or is one permitted to open only one? Are there other tax-free investments worth considering? Government bonds, etc?

Thank you for any help,

Sam
Print the post Back To Top
No. of Recommendations: 0
<<Ideally, of course, we would like to invest in the stock market in some sort of tax-deferred manner
or with tax-free earnings. Given that we are participating in the 401K plan, can we also open an
IRA account? What is the maximum each of us can contribute to this on a yearly basis?

Is it possible to open both an IRA and a Roth IRA, or is one permitted to open only one? Are there other tax-free investments worth considering? Government bonds, etc?>>

Yes, you may open either a traditional IRA or Roth IRA or both, but total contributions cannot exceed $2000 for each of you. This means you can contibute $2000 to a tradition or $2000 to Roth IRA or some combination of $2000 to both, but do not exceed $2000 overall.

It would appear from your description of your finances that you would only be able to make non-deductable contibutions. Therefore, it would make sense to only open a Roth IRA.

In regards to maximizing tax-deferred investments, I will borrow a phrase from CodyZen, "IMHO one should not use 'reducing taxes' as a major objective in making investment decisions."

Your situation seem similar to another couples on another thread titled 'Are variable annuities a reasonable option?' You will find CodyZen's advice and other great advice as you read this thread. It can be found at the following link:

http://boards.fool.com/Message.asp?id=1040013000866000&sort=postdate
Print the post Back To Top