Retirement Planning
Original post:
> I have been trying to find some information about the limits of
> contributing to an IRA and a 401k plan at the same time. I have
> glanced through several financial books but none of them seems to go
> into detail. Could someone please recommend a good source of
> information? My wife and I have been contributing the maximum of $2000
> each for the last several years. We now have the opportunity to
> participate in our employer's 401k plan but I'm not sure if it would
> worth it.
Chuck replys:
Regardless of your contribution to either plan, you can contribute up to
each plan's limits. For the IRA, that would be $2000 per year, for the
401(k), that would be 15% of your income to a cap of $9500. Your
employer may match a portion of your 401(k) contribution, so the total
contribution on your behalf can be up to 25% of your income. The 401(k)
allows you to borrow from your account if need be, without penalty,
provided you repay it in a timely fashion, and it has other features
that make it a very atteactive way to provide for retirement. Ideally,
as long as the investment choices are good, the 401(k) would be a better
vehicle than the IRA, but there is no reason not to do both, at least
from a legal standpoint. If you participate in the 401(k), you might
lose some or all of your IRA deduction, but that should not make a
difference in the decision of whether or not to participate in the
401(k). BTW, all of your contributions and their earnings belong to you
from Day 1, your employer's contributions will be vested over some
period of time, depending upon the plan.
(
geocities.com/vyque)