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

How much you save now may determine how comfortable you are in retirement. Combining 401(k)s and IRAs can make it even comfier.

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-deferred account that makes saving a cinch through automatic payroll deduction.

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

Facts & figures you need to know


Who can participate

401(k)

Anyone who works for an employer that offers a plan.

IRA

Anyone under age 70½ with earned income can open a traditional IRA.

Roth IRAs have no age limit.


How much you can invest

401(k)

If you're under age 50, your annual contribution limit is $18,000 for 2016 and 2017.

If you're age 50 or older, your annual contribution limit is $24,000 2016 and 2017.

IRA

If you're under age 50, your annual contribution limit is $5,500 for 2016 and 2017.

If you're age 50 or older, your annual contribution limit is $6,500 for 2016 and 2017.


What you can invest in

401(k)

Most employers limit you to a preselected list of investment choices.

IRA

You can invest in a wide variety of mutual funds, exchange-traded funds (ETFs), and individual stocks and bonds.


How to get started

401(k)

Your employer may automatically enroll you in the plan and offer you an easy way to contribute through automatic payroll deduction.

IRA

You can open an IRA on your own through almost any bank, brokerage company, insurance firm, or investment company.

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.

Open your IRA today

We're here to help

Talk with an experienced retirement specialist.

Call 800-551-8631

Monday through Friday
8 a.m. to 10 p.m., Eastern time

REFERENCE CONTENT

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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.