Employer 401k vs. Tranditional 40k?

Question

For 2007 I will be maxing out on my employer based 401K, and I am looking for way to do further contributions toward retirement.

My income is too high to go down the Roth IRA route. What about the so called "Traditional 401k"? Can I still make contributions into one of those, while maxing out on the employer 401K?

Thanks for the clarification : I guess my question is then if I can contribute to a Traditional IRA when I am maxed out on the 401K.
Or do the to have nothing to do with each other.

Answer 1

I'm not quite sure what you are talking about when you say "Traditional 401(k)". Your employer based 401(k) is a traditional 401(k) plan. The only time a 401(k) plan is referred to as a traditional 401(k) that I have seen is when comparing it to the relatively new Roth 401(k).

As to options on where you can place additional money with the tax advantages of a retirement fund, you can fund a traditional IRA. I believe you can contribute up to 5,000 dollars a year into these accounts above and beyond what you contribute to your 401(k).

If you have already maxed out a traditional IRA, there may be other options but you would want to contact a good, fee-only financial planner to figure out what other options are out there.

If you don't need the tax advantages of retirement accounts, start a brokerage account. If you are risk adverse, those guaranteed savings accounts such as ING or Emigrant Direct offer phenomenal rates of guaranteed returns.

Good luck!

***Edited to add, the answer above mine makes a huge incorrect statement. There are limits to what you can contribute to an IRA. If you contribute above the limit, that money is subject to a 6% penalty. And to clarify the limit for this year is 4,000 if you are under 49, and 5,000 if you are 50 and above.

Also, stay away from the Smith Barnes and Merryl Lynch unless they have a fee only planner to refer you too. Otherwise you will get nothing but biased advice on where to put your money.

Answer 2

I am 99% sure you are confused. I know of no such thing as a traditional 401K and I have experience to know such things. There is a traditional IRA which I think is what you mean.

You can open a traditional IRA and make deposits up to the limit and depending on your tax situation at the end of the year those deposits may or may not be pre-taxed. A lot of people don't know that a traditional IRA has no limit for what you can put in, just a limit each year as to what can be pre-taxed.

I think you should be paying for someone like a Smith Barney or Merrill Lynch to open your Traditional IRA and other accounts rather then taking it on yourself. They charge more then an E-Trade would, but you get the face to face time with a professional rather then do it yourself.

Answer 3

I believe you're referring to an IRA.

I, also, believe you can contribute to an IRA except you don't get the tax deduction since you have a 401K at work.

However, it sounds like you're not look for a tax deduction you're just wanting to put money away for retirement.

I suggest you call a no-load mutual fund, such as, Fidelity, Vangaurd, T Rowe Price... etc. They can help you with your question in regards to limits and whether a Roth IRA or a Traditional IRA is the best way to go.

Or better yet, hire a certified financial planner to help you plan for retirement. Make sure the planner is not trying to sell you anything.

Answer 4

401k is the program run by employers for employees. There is no other 401 plan. There is a traditional IRA and a Roth IRA.