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re: Traditional IRA contribution limits?
Posted on 2/13/10 at 12:20 pm to foshizzle
Posted on 2/13/10 at 12:20 pm to foshizzle
So with that - one should progress through the retirement options as follows:
1 - Contribute to 401k up to company match
2 - Contribute to Roth IRA to 5k limit
3 - Add to 401k up to max allowable
And past this level, there are no more tax-advantaged options, correct?
My previous thinking led me to believe that there was no reason to contribute to a 401k over the company match because you'd get the same benefits (incl. high contribution limit) with a traditional IRA but with access to many more investment options.
Any problems with my logic?
1 - Contribute to 401k up to company match
2 - Contribute to Roth IRA to 5k limit
3 - Add to 401k up to max allowable
And past this level, there are no more tax-advantaged options, correct?
My previous thinking led me to believe that there was no reason to contribute to a 401k over the company match because you'd get the same benefits (incl. high contribution limit) with a traditional IRA but with access to many more investment options.
Any problems with my logic?
Posted on 2/13/10 at 12:55 pm to Pheeze
quote:
My previous thinking led me to believe that there was no reason to contribute to a 401k over the company match because you'd get the same benefits (incl. high contribution limit) with a traditional IRA but with access to many more investment options. Any problems with my logic?
It depends. If you options in your 401k are limited and high cost you might be better with a taxable account for money above the match, but it would have to take a pretty crappy plan to put you in this situation. Just remember, anything you put into a 401k will be taxed as income upon withdrawal in retirement, potentially increasing your marginal tax bracket. Income from taxable accounts have lower tax rates on qualified dividends and long term capital gains although this could change in coming years. The compounding effect of tax deferral is hard to beat long term.
Posted on 2/13/10 at 1:05 pm to Pheeze
Number 4 would be a variable annuity if you want a tax-advantaged account.
But if you can afford to max out your 401 and IRA and still have money left over you are a special person indeed.
But if you can afford to max out your 401 and IRA and still have money left over you are a special person indeed.
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