Now that you have maxed out 401k and Roth IRA, what do you do next? This is a question that many people are asking, and the answer may surprise you. Contrary to popular belief, you don't have to invest in a taxable account once you reach these contribution limits. There are several other options available to you. This article will discuss some of the best options for those who have maxed out their retirement accounts.
How To Maximize Your 401k And Roth IRA
Saving for your future is an important aspect of financial planning. Saving through a 401k and Roth IRA can give you peace of mind as they are both flexible tax-advantaged options. The best way to maximize these retirement accounts is to contribute the maximum amount allowed annually and increase your contribution percentage each year while staying within limits.
Since 401k contributions are pre-tax, they can help lower your tax bill significantly during the contribution year, with money that would have gone to taxes deposited in a retirement account instead. Additionally, many employers offer matching dollars for 401k offerings, which can be an extra incentive for contributing more. Modified adjusted gross income (MAGI) also comes into play in this situation. Be sure to understand the rules and keep track of your MAGI to ensure you are taking advantage of all the benefits.
What To Do After Maxing Out 401k And Roth IRA
The IRS sets 401 k and Roth IRA contribution limits, and once you reach them, you cannot contribute any more money to these accounts. Here is a list of some of the best options:
1. Invest In Taxable Accounts
If you have money left over after maxing out your retirement accounts, you can invest this money in a taxable account. This could include stocks, bonds, mutual funds, and ETFs. Investing in a taxable account allows you to take advantage of additional tax benefits you wouldn’t get with an IRA or 401k.
2. Consider Annuities
Annuities are another option for those who have reached the contribution limits for their retirement accounts. Annuities offer a steady income stream that can benefit those looking for long-term financial stability.
3. Utilize Health Savings Accounts (HSA)
An HSA is a great way to save on medical expenses. These accounts are tax-advantaged, so any money you withdraw is not taxed. You can also invest your Health Savings Account (HSA) funds in stocks, bonds, and mutual funds to grow your savings even more.
4. Invest In Real Estate
Real estate is a great way to diversify your investments and generate additional income. Investments in real estate involve many ways, such as buying rental properties or flipping houses.
5. Consider Life Insurance Policies
These policies provide financial security for those who may not have enough saved up for retirement. They can help ensure that your family will be taken care of should something happen to you before you reach retirement age.
6. Look Into Charitable Giving
Charitable giving is a great way to give back and make a difference. Not only can you help out those in need, but you can also reduce your tax bill by taking advantage of the charitable giving deduction. Roth IRA contributions are not deductible, but you can donate these funds to a qualified charity and take advantage of the charitable deduction.
Can You Contribute To A Roth IRA After Maxing Out 401k?
The short answer is yes. Even if you’ve maxed out your 401k contribution limit, you can still contribute to a Roth IRA. The IRS sets separate contribution limits for both retirement accounts and no restrictions on contributing to one after the other. This means that you may be able to save even more money for your retirement by taking advantage of both options.
It's important to remember that you don't have to choose between a 401k or a Roth IRA; it's possible to use both accounts simultaneously to maximize your retirement savings and enjoy the tax benefits of each account type. Additionally, read up on different types of investments, such as stocks, bonds, mutual funds, ETFs, annuities, real estate, and life insurance, before deciding where to put your money.
Is It Good To Have Both A 401k And Roth IRA?
Absolutely. Having both a 401k and Roth IRA can be beneficial for many reasons. For starters, it helps diversify your retirement portfolio as you can access different investment options depending on your chosen accounts. Additionally, having two different accounts allows you to take advantage of both tax-deferred growths with a traditional 401k and tax-free withdrawals with a Roth IRA.
Having both types of retirement accounts also gives you more flexibility regarding contribution limits and withdrawal rules. This means you can adjust your contributions based on your income level or other financial goals while taking advantage of the tax benefits associated with each account type.
Final Thoughts
Maxing out your 401k and Roth IRA is a great way to save for retirement. But after you reach these limits, other options are still available to help you continue investing in the future. Investing in taxable accounts, annuities, HSAs, real estate investments, life insurance policies, and charitable giving can all be beneficial in one way or another. It's important to educate yourself on the different investment types and make sure that you're making informed decisions about where to put your money. Remember that having both a 401k and Roth IRA is a great option since it provides more flexibility with contributions and tax benefits.
If you have questions or want more information about saving after you max out your 401k or Roth IRA, set up a call with us at Bolder today. Our money coaches can help determine the best ways for you to save and set you on the path to financial success.
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