You can have a 401 (k) and a Roth IRA at the same time. Contributing to both is not only allowed, but it can also 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. Many, if not most, retirement investors can contribute to a Roth IRA and a 401 (k) at the same time.
Roth IRAs and 401 (k) plans are essential tools for accumulating your retirement savings. When you're closer to retirement, you may want to transfer both to a Roth IRA to avoid the required minimum distributions. You don't need to make the minimum distributions required in a Roth IRA until after the owner dies. Or, you can convert the traditional 401 (k) into a traditional IRA and the Roth 401 (k) into a Roth IRA to maintain some tax diversification.
Therefore, a Roth IRA can be a good way to save to achieve pre-retirement goals if you wouldn't otherwise contribute to an IRA. This type of Roth 401 (k) account is different from the contributions to a Roth IRA that your employer can provide or from a Roth IRA that you can open with a brokerage agency on your own. This involves making a non-deductible contribution to a traditional IRA and converting those funds into a Roth IRA. While not everyone has employer-sponsored Roth offers or even a 401 (k) plan, you may have the opportunity to divide your retirement savings in a similar way on your own with a traditional IRA and a Roth IRA.
You'll also learn how much you can contribute to that Roth IRA, how to avoid eligibility restrictions, the flexibility of saving on a Roth IRA compared to other individual retirement accounts, and the benefits of saving on both a 401 (k) and a Roth IRA. While you can withdraw any contribution to a Roth IRA at any time, regardless of the reason, without receiving any penalty, you will be penalized if you withdraw any investment benefit from your Roth IRA before age 59 and a half, unless for a justifiable reason.