How many different retirement accounts should I have?
If I have a 401k, should I also have an IRA? If so, can/should I have both a traditional IRA and a Roth IRA? What are the tax implications of multiple retirement accounts? What other considerations are there?
While the rules allow for contributions to multiple 401k plans, the aggreation contribution rules apply to employee (salary deferral) contributions. For example, if you are self-employed on a part-time basis and open a solo 401k for the self-employed business, and you also contribute to your day time job's 401k, you will need to make sure that you don't go over the oveall employee contribution limit, which is $18,000 for 2015 and it would be aggregated between the two plans.
If your employer offers a matching contribution, you should at least contribute up to the matching amount. This is essentially "free" money that you can hardly get elsewhere.
Once you maximize the matching contribution, consider the investments in your 401k. Are you happy with the returns? How are the fees and costs involved? Often, if someone wants to find better investment options at lower costs and fees, they may consider opening up an IRA account. You can shop for the best plan provider with investment options that fit your criteria. Others may max out their 401k limit and having an IRA can be a good way to shelter more money into a tax-deferred account.
You can have a Roth and a traditional IRA. This is a good way to diversify your taxes during retirement.
There is no tax consequence for having multiple retirement accounts, as long as you follow all the rules concerning contributions, investments and maintaining your retirement accounts. Having multiple accounts may take more effort to manage, however. Be sure to keep track of your contributions and investments. You can also talk to a certified financial planner to help you allocate your investments.
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