I am 42 so I want to put a lot away over the next 10 years to catch up. I have about $17k in IRAs and a 401k account. Can I max out (put in the full amount for the current or deferred tax deduction) both a Traditional and a Roth IRAs (assuming my income qualifies). Then can I also max out my 401k? Given the current limits (401k 15500, IRAs $5k each) that would suggest a max contribution of 25500 (I get no employer contribution). Is there a way to save more in some tax deferred account?
As a corollary question, at the end of the year can I take all the money out of the 401k and roll it over into a Trad IRA thereby effectively having 20500 in a Trad IRA that year?
Sue
{ 3 comments… read them below or add one }
Alma
For people under 50, the max is $20,500.
$15,500 in to your 401k; and,
$5000 in to your IRA.
Though there are different types of IRAs, your total contributions to all IRAs are limited to $5000 for the year.
Any remainder that you have to invest would go in to taxable accounts. One option would be to invest in Municipal Bonds. They are exempt from Federal Income Taxes and may be exempt from state income taxes also.
Jason
Here are the rules:
Nicole
Wayne Z has it spot on….give the man the points. One other thing to answer though…You can only take the money out of the 401k and into a Trad IRA if the plan allows it and if you’ve met certain conditions. The conditions for taking out employee contributed 401k contributions is death, disability, hardship, or termination from service. Unless you meet one fo those conditions you won’t be able to roll your money over…and with a hardship you still can’t roll it over so that leaves you only the other three conditions. Hopefully you don’t meet the first 2 (death and disability) which leaves the last…termination from service. You’ll have to quit each and every year…doubt your employer would like that very much.
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