I have a traditional 401(k) account from my employer and I'm thinking about opening a Roth IRA to start saving for my daughter's college.

From a tax perspective, does having a 401(k) account impact the Roth IRA tax-free growth? What are the differences between having just a Roth IRA and having a Roth IRA and a 401(k)?

I saw this question that is somehow related to what I'm asking but my question is more from a tax perspective.

1 Answer 1


Having (or contributing to) a 401(k) does not affect the tax benefits of your Roth IRA. They can affect your AGI and your ability to contribute, though (e.g. 401(k) contributions lower your AGI, which may make you eligible to contribute where you were not before).

The contribution limits to both are independent as well - so (if eligible) you can contribute the maximum to both accounts. The limits apply to all IRA accounts and all 401(k) accounts, though, so you could not contribute the max to both a traditional IRA and a Roth IRA in the same year.

That said, you might also consider a 529 plan instead, which also provides tax-free growth. There are pros and cons to both, but some states give state income tax deductions for 529 contributions, and it has higher contribution and income limits. The main drawback is that it has to be used for education expenses, whereas a Roth does not - it's intended for retirement but form some reason education expenses are penalty-free as well. Depending on your state, the investment choices may be limited as well.

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    'in any way' probably isn't wholly accurate. Contributions to your 401(k) plan does affect your AGI (adjusted gross income) and MAGI (modified AGI). You may need to make those contributions to get your MAGI low enough to be eligible for an IRA. However, this is not typical and if you are close to the limits on whether you can contribute to an IRA or not, consulting a tax professional will be very valuable here. Commented Mar 8, 2018 at 19:39
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    @R.Hamilton Good point. I generally try to avoid absolutes like that for this very reason, but did not consider that possibility.
    – D Stanley
    Commented Mar 8, 2018 at 19:43

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