Retirement savings option when 401K and Roth contributions are maxed?

Question

I am a professional in my early 40s.  My company allows me to take a portion of my paycheck and contribute it to a 401K and/or Roth IRA which have tax advantages compared to regular non-retirement investments.  The max allow contribution for the Roth is $5,000 a year and my max total contribution to the retirement funds (401K and/or Roth) is $16,000.  I have recently hit that limit (max of 16,000 through contributions to both the Roth and 401K) and am looking for other ways to save for retirement with additional money that I am able to contribute.  

My company's retirement benefits are not great (no fixed pension and no medical coverage - I will be on my own with whatever I can save when I leave), so I want to have quite a bit set aside (particularly given the long-term uncertainity of Social Security and Medicare).  I want to be able to put as much toward retirement now while I have the extra income to do so.

I already have some other non-retirement-specific general investments (moneymarket, stock investments, etc) and I could obviously put more money into those, but I am specifically interested in other investment tools aimed specifically toward retirement and with associated tax or other related advantages to that end.  

Any suggestions of other types of investments or savings options for my situation would be greatly appreciated.

Anonymous · Accepted Answer

One of the answer below is wrong -- you cannot put $5000 each into a Roth and a Traditional IRA.  Your limit of $5000 per year applies to both combined.

That said, your next step depends on how much you have to invest and how you want to invest it.  

Generically, I would say start with $5000 per year in I-Bonds at savingsbonds.gov.

Then $10,000 in a a regular mutual fund or brokerage account at Vanguard.com.  Mutual fund -- buy 50% total us stock index fund and 50% total international index fund.  Brokerage account -- buy shares of the ETF VT.

Then repeat.  You are limited to $5000 a year in i-bonds.  So above that amount buy TIPS Bonds at auction.

For more advice on a similar line, try the book:  

The Lazy Person's Guide to Investing ~ Paul B. Farrell

pasco · Answer

in the experience that your organization can provide Roth 401K then placed you money in there. you would be taxed as we communicate yet no tax on income and income once you retire. it is a strong way in case you think of which you are going to be rather wealthy once you retire. If no Roth 401k then max out your 401K and open an IRA account. in the experience that your income is honestly previous 110K then Roth IRA is definitely not a good option eligibility to take a position in roth 401k is going away with starting to be income.

InspectorBudget · Answer

You have taken full advantage of the best 2 options available to you, which is very wise..

If you have a non-working wife,  you could open a spousal IRA for her and put in $5,000, which will be pretax.

If you have kids, you could consider a 529 plan.

You could also consider buying municipal bonds of your state ( the purchase is made with after tax $$, but at least the interest earned is federal & state tax free ).  Or US Treasuries, which is state tax free.  Won't help you reduce your taxable income, but at least the interest can be sheltered a little.

Other than those, I really cannot think of any.

A Hunch · Answer

Are you talking about a ROTH 401K or a ROTH individual plan?  There is a difference.
If you are contributing through your employer it may be a ROTH 401K.

You are also eligible to contribute to a $5000 to a traditional IRA

You could do:  
401K = $16000
Individual ROTH = $5000
Traditional IRA = $5000
making a total of $26000

That's a lot of money annual to tie up in retirement plans.  Are you sure that makes the most sense?

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Retirement savings option when 401K and Roth contributions are maxed?

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