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Retirement

401(k) vs. IRA? Use both if you can.

The money you save and invest today can help you have a more comfortable retirement. Combining 401(k) plans and IRAs can make it even comfier.
3 minute read

If your employer offers a retirement plan, like a 401(k) or 403(b), and will match a percentage of your contributions, you should definitely take advantage of it—after all, it's free money for you. Plus you'll have a tax-advantaged account that allows you to save through automatic payroll deductions.

If your employer doesn't offer a retirement plan, an IRA can be a good start to your retirement savings and another opportunity for your earnings to grow tax-advantaged.

Facts & figures you need to know

  401(k) IRA
Who can participate? Anyone who's eligible to participate in an employer-sponsored retirement plan. Anyone with earned income can open and contribute to a traditional IRA.
Nonworking spouses can also contribute if the couple files jointly.

Note that income limits apply to Roth IRAs
How much you can invest

If you're under age 50, your annual contribution limit is $23,000 for 2024.

If you're 50 or older, your annual contribution limit is $30,500 for 2024.

If you're under age 50, your annual contribution limit is $7,000 for 2024.

If you're 50 or older, your annual contribution limit is $8,000 for 2024.

Get details on IRA contribution limits & deadlines
What you can invest in Most employers limit you to a preselected list of investment choices. You can invest in a wide variety of mutual funds, exchange-traded funds (ETFs), and individual stocks and bonds.
Pick investments for your IRA

 
How to get started Your employer may automatically enroll you in the plan and offer you an easy way to contribute through automatic payroll deduction. You can open an IRA on your own through many banks, brokerage companies, insurance firms, or investment companies.
Learn how to open your IRA

Eligible for both? Go for it!

The good news is that you don't necessarily have to think IRA versus 401(k). You can save with both as long as you're qualified and heed contribution and income limits.

Learn how an IRA and a 401(k) can work together

Learn how an IRA and a 401(k) can work together

If you're eligible to invest in a 401(k) and an IRA, here's an efficient way to do it:

  1. Enroll in your company's 401(k) and contribute at least the amount that your employer will match.
  2. Contribute the maximum allowed to your IRA.
  3. Go back to your 401(k) plan and contribute beyond the match to the annual maximum allowed, if possible.

We recommend following these steps because an IRA offers more flexibility and choice, giving you a greater chance to diversify your assets and reduce your investment risk.

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Open an IRA

All investing is subject to risk, including the possible loss of the money you invest. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account.

Diversification does not ensure a profit or protect against a loss.

When taking withdrawals from an IRA before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax.