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I'm 31. I put 11% of my $$ into a 401k.

I put about $600 a month into a high interest savings account.

I max out my ROTH IRA.

I'm wondering if I should max out a traditional IRA as well or if there is another asset I should be putting my money into.

Thanks.

7

Your max contribution to your Roth IRA and your traditional IRA share the same cap, so if you are maxing your Roth IRA you cannot have a traditional one as well. I would put the additional into your 401k or perhaps a 529 if you have any kids.

  • You sure about that? I think you can put $5000 in each. – Jack Marchetti Aug 4 '10 at 21:52
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    Yes, I am sure. For reference: Roth IRAs and traditional IRAs. If contributions are made to both Roth IRAs and traditional IRAs established for your benefit, your contribution limit for Roth IRAs generally is the same as your limit would be if contributions were made only to Roth IRAs, but then reduced by all contributions for the year to all IRAs other than Roth IRAs. Employer contributions under a SEP or SIMPLE IRA plan do not affect this limit. From: irs.gov/publications/p590/ch02.html#en_US_publink1000230988 – en1gmatic325 Aug 4 '10 at 22:00
  • So just so I'm clear, I can't put $5000 into my ROTH and $5000 into a traditional in the same year. – Jack Marchetti Aug 5 '10 at 15:01
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    Correct. You can have both, but they share that same cap. Contributing to one lowers how much you can contribute to the other. If you've already put $1000 in your traditional IRA, you can put, at most, $4000 in your Roth IRA that year. – en1gmatic325 Aug 5 '10 at 16:48
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Roth and 401k are first because with the Roth you have tax free withdrawals (awesome!) and with the 401k you have tax free contributions (awesome!) as well as potential employer matching. Traditional IRAs would be the final thing I would contribute to after both of those. And in your case, unless you make around 150k, you aren't maxing your 401k; so I'd do that first.

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Another option if it is available is a Roth 401k. It is similar to a Roth IRA in that you pay taxes up front, but the withdrawals are tax free.

  • Are those only available through your employer? – Jack Marchetti Aug 4 '10 at 19:51
  • Yes, and not all employers offer them. – JohnFx Aug 4 '10 at 20:02

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