+8 votes
by (3.4k points)
Looking for some advice for my husband (because he’s asking and I’m honestly not sure). He just switched jobs, and combined the money from his last 2 401ks into a rollover IRA. He currently has a job, only matching 3% of his 401k, so he’s thinking of only putting money in up to that match, and putting $100/mo into the IRA. Is there a reason he should or shouldn’t put more money into the IRA vs. the 401k? Maxing out both is not currently an option.  
Looking for some advice for my husband (because he’s asking and I’m honestly not sure).

7 Answers

+5 votes
by (1.5k points)
The IRA will almost certainly have lower costs and more investment options so putting in up to the match in the 401k and then remaining into the IRA is the right move.  
by (3.4k points)
@clad370 thanks! This is what he’s leaning toward since the 401k also doesn’t best for 5 years
+5 votes
by (4.1k points)
I agree only up to the match in 401k. Then open a traditional or Roth more choices less fees.  
+6 votes
by (6.9k points)
You will be losing the advantage of tax deferrment. You can always convert later on and take advantage now.  
by (6.8k points)
@endive9 Rollover IRAs operate like 401(k)s and Traditional IRAs, and contributions are tax deferred.  
by (6.9k points)
Point taken and understood. But, correct me if i'm wrong, he will now be contributing with after tax dollars thus losing the advantage of lowering his taxable income.  
+6 votes
by (4.1k points)
You can still deduct your contributions to a Traditional IRA outside of your 401k.  
+6 votes
by (2.8k points)
Yes, first take the 401k match for the free money, then contribute to max out a ROTH IRA, not a regular. This is tax free withdrawal in retirement. Most will have a higher tax rate in retirement. WIth a traditional IRA you get the write-off the year you contribute but still pay taxes on the with-drawl. Make sure he qualifies for ROTH (If he makes under the salary limit of $124k year filing separately or under $196k filing jointly he qualifies). Max out the ROTH IRA ($6k/yr) then move to max out the rest in the 401k ($19K). Always try to max. yes it a lot now but your future selves will thank you!  
+3 votes
by (3.3k points)
Really just comes down to the investment options. If it is for a large company, you may have access to share classes not available to an individual
by (3.4k points)
@stadtholder he really doesn’t have any options with his 401k. I have a SEP IRA and averaged double what his 401k did last year. It has him wondering what the best options are, since we are young and he’s not really risk averse
by (3.3k points)
@pampas80008 oh ok yeah, then just get the match and do your own thing. My only addition to it would be to start contributing to a Roth instead. Hedge your bets on where taxes will be in the future  
0 votes
by (930 points)
Do you have an HSA? If so get company match then max HSA then IRA then back to 401K. Roth or traditional is a lot more nuanced than people mentioned earlier.  
by (3.4k points)
@clad370 Cake yes  the HSA we max out. But maxing out both the IRA and 401k just isn’t feasible for him yet. Sounds like the Ira is the next one to max out. Thank you!  
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