I have a personal IRA set up with a financial firm and my employer is planning on initiating a 401K plan. Will any taxes arise that would hurt me should I choose to participate in both? It doesn't seem like there are any drawbacks from utilizing both savings plans, but I would like to be sure.
Thanks...
2006-08-14 06:42:15 · 2 answers · asked by cozmomedia 1 in Business & Finance ➔ Investing
No problem participating in both but they are taxed differently.
401k: not taxed before you contribute but taxed as income when you withdraw the money.
roth IRA: after tax contributions, tax free when withdrawn.
Taxes should then be considered. Maybe it's best to contribute in the 401k to the point of getting the max employer contribution then put the remainder of what you want to contribute into the ira.
2006-08-14 06:50:53 · answer #1 · answered by TC 3 · 0⤊ 0⤋
you may participate in both without a penalty or taxes. Most of these, if not all, are pre-tax deductions.
However, if you withdraw from your IRA or 401, then you are penalized big time.
2006-08-14 13:48:08 · answer #2 · answered by Scott D 5 · 0⤊ 0⤋