Can I Contribute to Both a 401k and a Roth IRA?
Investments in all the independent retirement accounts and 401K account are with an eye to have a financially secure retired life. The question “can I contribute to both a 401k a Roth IRA“can be answered in plain yes but to understand these two different saving investment vehicles, it is good to know about both the plans.
401k investment plan is basically an employer’s sponsored plan where most employers also contribute an equal amount as of your contribution. The contribution limits changes from year to year. For the year 2010 the limit is $16500 for those who are below 50 years of age. Those who are in-between 50 to 59 ½ can avail an additional catch-up limit of $5000. Contribution towards 401k is made through your employer and the amount is deducted from your pay before tax. This total contribution and the growth over the period is 100% tax free. It is an opportunity one should never miss and utilize to the maximum.
In case you have surplus funds and willing to invest for your future as retirement fund, Roth IRA may be the best choice provided your total annual income is below $120,000. The upper limit to contribute in Roth IRA is $5000 for those under 50 years of age with additional catch-up limit of $1000 who are in-between 50 and 59 ½ . While making contribution, you would be paying tax on the contributed amount but the earning over the period and final with drawl would be 100% tax exempted.
Considering the volatile economic conditions and the current trend of Wall Street, it is wise to make maximum use of these investment facilities where you can avail all the tax advantages and find your investments risk free. I am confident that now you will find no room to question “Can I contribute to both a 401k a Roth IRA”.
