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I Already Have a 401(k), Do I Need an IRA, Too?

Lisa Whitley — Well, look at you! All signed up for your workplace retirement account and saving for the future! But should you be doing something more? Specifically, should you add an Individual Retirement Account (IRA) to the mix?


  • If you reached the limit on what you are allowed to contribute each year to your 401(k) or similar workplace retirement account, you could supplement your retirement savings with an IRA. However, note that your ability to do so is limited by your income. For example, for a married couple, your ability to use a Traditional IRA ends when your annual income exceeds $124,000 ($206,000 if a Roth IRA).
  • If your employer does not match your contributions, then the advantage of a workplace retirement account over an IRA narrows. The biggest plus for the 401(k) will likely be that the annual contribution limit is higher ($19,500 versus $6,000). If you are unhappy with the investment options offered by your workplace retirement account (for example, you find that the fees are too high), you could split your contribution between the 401(k) and the IRA. But do consider this: an advantage of a workplace retirement account is that the money invested is withheld from your paycheck automatically; it never touches your hands. Even if you set up an automatic deposit to an IRA (and you should!), there will be at least a day or two when that money will be in your checking account; it may be easier to think of this investment as discretionary. You will need to exercise some discipline.
  • And perhaps your employer does match contributions, but as in the case above, you are unhappy with the investment choices. For example, you may wish to put some of your retirement savings in an after-tax Roth account and your employer does not offer that. If so, then the strategy would be to invest within the 401(k) up to the employer match, and then direct the remainder of your retirement savings to a Roth IRA. (Again, bear in mind income limits.)

Just when you thought you were done, maybe there is more to do!In any case, log into the Your Money Line to ask your Financial Concierge what's right for your unique situation!