Can I have an IRA and a 401k? This is a common question asked by individuals who wants to set up not just a single retirement account so that they could have several sources of income when they reach their golden years. As the saying goes “the more the merrier”, having more than one retirement plan could give you a happier retirement but there are restrictions and certain disadvantages a participant might overlook when having several retirement accounts.
For an employed individual, having several retirement plans could not be avoided especially if the person switches to another job or transfers to different employers wherein a rollover didn’t happen. Another reason for having not just one retirement account is when an employed person with an employer-sponsored IRA or 401 k accounts who also has a part time business qualifies for a Solo 401k. As you see, having several retirement accounts is possible.
Can I have an IRA and a 401k is not really the question, it is the capability of keeping both accounts
However there are certain restrictions that we have to remember particularly for IRAs. For self employed individuals, having a traditional IRA when you want to make after tax contributions shall require you to have a separate Roth IRA. Furthermore, the contribution limits for these two are combined even if they are separate accounts. There are also income restrictions for IRAs which your financial adviser could compute for you, also the limit on your contributions is relatively low. This makes the Solo 401k a better option for self employed people because unlike traditional and Roth IRAs, the Solo 401k has a built in Roth subaccount making it convenient for the participant to make after tax contributions.
For small business owners, having the Solo 401k provides you with higher contribution limit enough for you not to set up another plan. However if you still want to pursue having a self directed IRA, you may still do so. Just make sure that you monitor your investments and get a financial partner that will help you manage your 401k and IRA. Can I have an IRA and a 401k at the same time? Definitely yes!
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