You’ve Maximized Your 401(k). Should You Invest After-Tax in an IRA?

Feb 01

If you have contributed the maximum to your 401(k) plan, you may want to consider additional after-tax savings in an IRA account. While the contribution won’t be tax-deferred, it will still grow tax-free and can provide an additional source of income in retirement. And since you contributed with after-tax dollars, you can withdraw them tax-free, and only the growth will be taxed in retirement, which gives you some control over income.

It can be a good plan for additional savings that you won’t have to manage from a tax perspective, the way you do your taxable investment accounts. But of course, there is some paperwork you’ll need to stay on top of.

The Basics: Setting up the Account

If your primary (or only) vehicle for retirement savings has been through an employer-sponsored tax-deferred account like a 401(k), you may be a little surprised by the process of opening an IRA. With a 401(k)... ...