Photo of Ray Ferrara CFP Ray Ferrara CFP Jan 12, 2021

Saving for your retirement is possible through several different retirement accounts. However, which ones you are eligible for depends on your personal circumstances. For many people with full-time jobs, their employers offer a company-sponsored 401(k) plan. If your employer does not offer a 401(k) plan, you can still save through an individual retirement account (IRA). However, if you are trying to maximize your retirement savings and grow a large nest egg, you might be wondering if you can contribute to both accounts.

Can I contribute to a 401(k) and IRA at the same time?

The short answer to that question is yes, you may contribute to a 401(k) and IRA at the same time. In fact, this is often a strategy that investors use to diversify their portfolios and get the most out of their savings.

With a 401(k), you may contribute up to $19,500 (or $26,000 if you are age 50 or older) per year to your account. This is a much larger contribution limit than the $6,000 (or $7,000 if you are 50 or older) with an IRA. However, the key difference is that an IRA offers you a lot more freedom with your investment decision making.

Under a 401(k) plan, your employer selects the different investment opportunities your funds are eligible for. Under an IRA, you have a lot more opportunities to choose how you want to invest your funds, which means you can slide your portfolio further in a more aggressive or conservative direction than you could with a 401(k) alone. 

One strategy might be to use your 401(k) savings funds for mostly conservative investments and use your IRA funds for mostly aggressive investments since you have less to lose with them. Ultimately, though, the strategy that works best for you depends on your individual circumstances. Often, it is wise to turn to a financial expert for advice and a strategy.

Talk to a ProVise CFP® professional about your 401(k) and IRA

Are you eligible for a 401(k) through your employer but are considering contributing to an IRA as well? This can be a great way to boost your retirement savings, but it is best to have a clear strategy for how to move forward and get the most out of your finances.

At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a financial plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about planning for your retirement? Contact ProVise today to schedule a complimentary consultation.