If your 401 (k) plan has limited investment options, consider opening a traditional or a Roth IRA and contributing to the annual maximum. Then, if you can, put more. In many cases, a Roth IRA may be a better option than a 401 (k) retirement plan, as it offers more investment options and greater tax benefits. It can be especially useful if you think you'll find yourself in a higher tax bracket later on.
However, if your income is too high to contribute to a Roth, your employer offers you a counterpart, and you want to save more money each year, it's hard to beat a 401 (k) plan. You can have a 401 (k) and a Roth IRA at the same time. Contributing to both is not only allowed, but it can be an effective retirement savings strategy. However, there are some income and contribution limits that determine your eligibility to contribute to both types of accounts.
The sooner you can start saving for retirement, the better, but when you start, it may not be feasible to save a lot of money in both a 401 (k) and a Roth IRA. You control your Roth IRA and your investment options are not limited as 401 (k) plan investment options usually are. In other words, the amount you can contribute to a Roth IRA depends, in part, on how much you earned in a year. This type of Roth 401 (k) account is different from Roth IRA contributions that your employer may provide or from Roth IRAs that you can open with a brokerage agency on your own.
An IRA not only gives you the ability to save even more, but it can also give you more investment options than you have in your employer-sponsored plan. While saving on a Roth IRA doesn't offer you any tax advantage today, future benefits can add up. After that, the tax advantages of Roth accounts, such as a Roth IRA (tax-free growth and retirement retirement), are always taken into account instead of traditional IRAs and their tax-deferred growth (meaning retirement taxes). Meanwhile, contributions to a Roth IRA are always made after paying income taxes, and qualified withdrawals during retirement are always tax-exempt.
Assuming you meet the eligibility requirements, contributing to both a 401 (k) and a Roth IRA can provide you with both short- and long-term tax advantages. A Roth IRA makes sense at any age at the beginning or even at the end of your career, so consider your retirement savings options and, if they're appropriate for your financial and income goals, open one as soon as possible.