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Maxed Out your 401(k) and your ROTH? Here’s What to Do:

If you maxed out your 401(k) savings for the year ($17,500) and contributed to your ROTH ($5,500) you may be wondering what the next best place is to save for the future.  Here are a few places to look:

  1. Open a taxable accounts.  You can open a regular brokerage account using your after tax dollars.  Every year, you’ll have to pay taxes on realized gains (dividends, capital gains, profits from the sale of anything you sold during that year), but the tax rate on these long term capital gains and qualified dividends are 15%.  That’s why Buffets effective tax rate is lower than his secretary’s effective tax rate.
  2. Self Employed? Consider a SEP IRA which can allow you contribute up to $52,000 or 20% of your self-employment income.  It operates like a traditional IRA, just with higher limits.
  3. Over the age of 50? The IRS allows you to make “catch up” contributions if you are 50 or older.  You can contribute up to $6,500 to your ROTH.