Are you allowed to have both a 401(k) and a SIMPLE IRA? If so, what about limits?
"I am not 100% sure, but I think the answer is this:  You can't max out both.  You could theoretically max out the SIMPLE IRA ($11,500) and then contribute $4,000 to your 401k, but your total can't exceed the 401k limit of $16,500.  This also means you could max out your 401k at $16,500, but you couldn't contribute anything to the SIMPLE IRA.  Note that no matter what, you can't contribute more than $11,500 to your SIMPLE IRA. (Note that this is all independent from your Traditional or Roth IRA, which are subject to their own limits, and not affected by your participation in employer-sponsored plans.) As I understand it, a 401k and a SIMPLE IRA both fall under the umbrella of ""employer-sponsored plans"".  Just like you can't max out two 401k's at two different employers, you can't do it with the 401k and the SIMPLE IRA.  The only weird thing is the contribution limit differences between SIMPLE IRA and 401k, but I don't think the IRS could/would penalize you for working two jobs (enforcing the lower SIMPLE IRA limit for all employer-sponsored retirement accounts). You should probably run the numbers, factoring in the employer match, and figure out which account-contribution scenario makes the most financial sense for you.  However, I'm not sure how the employer match helps you when you're talking about a small business that you own/run.  You may also want to look at how the employer match of the SIMPLE IRA affects the taxes your business pays. Disclaimer #1:  I couldn't find a definitive answer on your specific scenario at irs.gov.  I pieced the above info from a few different ""SIMPLE IRA info"" sites.  That's why I'm not 100% sure.  It seems intuitively correct to me, though.  Does your small business have an accountant?  Maybe you should talk to him/her. Disclaimer #2:  The $ amounts listed above are based on the IRS 2010 limits."
A Roth IRA is just an account wrapper.  Inside a Roth IRA you can have a plain 0.1% savings account, or a brokerage account, or an annuity or whatever.  There's no rate of return for a Roth IRA. That particular calculator seems to assume you'll be wrapping a brokerage account in a Roth IRA and investing in the stock market.  Over a long period 6% is probably a reasonable rate of return considering the S&P 500 has returned about 7% over the last decade. There's no one answer. You need to weigh the fees and quality of investment options on the one side against the slowly vesting employer contribution and tax benefits of 401k contributions in excess of IRA limits. IRA is an account. You can open as many as you want. What's limited is the contributions: you cannot deposit to the IRA (all of them combined) more than what you've earned during the year, or $5500 (for 2013), the lowest. There are also limits on how much you can deduct, depending on your income and availability of other retirement programs at your work. You can open as many IRAs as you want in your child's name, but if your child had only earned $500 this year - that's how much you can put in these accounts. Your wife and you share the earned income limit, so if your wife is not working, you can still contribute to the IRA in her name, based on your own earnings (i.e.: if you earned more than $11000 - you can contribute the maximum $5500 for each of you). The limits are for all the IRA combined, doesn't matter how many accounts you have, and how many of them are Roth. Ideally, one would contribute the maximum amount you're allowed to both the TSP and an IRA. For the 2015 tax year, that would be $18,000 for the TSP and $5,500 for the IRA (if you're 50 or older, then you can add an additional catch up amount of $6,000 to the TSP and $1,000 to the IRA). If, like most people, you cannot contribute the maximum to both, then I would recommend the TSP over an IRA, until you've maximized your TSP. Unquestionably, you should contribute at least enough to the TSP to get the maximum agency match. Beyond that, there is a case to be made to contribute to an IRA for certain investors. Benefits of TSP, compared to IRA: Benefits of IRA, compared to TSP: So, for an investor who wants simplicity, I would recommend just doing the TSP (unless you can invest more, in which case an IRA is a smart choice). For a knowledgeable and motivated investor, it can make sense to also have an IRA to gain access to asset classes not in the TSP's basic index funds. "Yes. Two years after your first contribution to the SIMPLE IRA, you can roll it to a traditional IRA.  You can still contribute ""pre-tax"", but the mechanism will be slightly different, since with an employer plan the contribution was automatically deducted from your paycheck.  With an individual plan, you make the contributions yourself and then get a tax deduction when you file.  Since contributions to traditional and Roth IRAs combined are capped at $5,500 if you're under 50, some sort of employer-sponsored plan might be better from a contribution standpoint. If your institution offers some sort of plan other than a 401(k), you might still want to roll to a traditional IRA, since you will have much more flexibility in the investments you choose. On the flip side, if that thought is overwhelming, having a smaller set of options might be better for your peace of mind." They are mutually exclusive.  Provided you meet the income limits you can contribute to both.  Employer match do not count toward the 18K.   On the other hand traditional IRA and Roth IRA are inclusive.  So if single and making having a MAGI under 118K, you could do the 18K of your own money into a 401(k), and $5,500 into a Roth. You can put in $23,500 of your own money with the employer match on top of that. Some companies allow you to make a post-tax contribution to the 401K. This is not a Roth contribution. This can be money beyond the 18,000 or 24,000 401k limit. The best news is that eventually that money can be rolled into 1 Roth-IRA. Not all companies allow this option. One company I worked for did this automatically when you hit the annual max. Of course that was made more complex if you had multiple employers that year. "You can have as many IRA accounts as you want (whether Roth or Traditional), so you can have a Roth IRA with American Funds and another Roth IRA with Vanguard if you like. One disadvantage of  having too many IRA accounts with small balances in each is that most custodians  (including Vanguard) charge an annual fee for maintaining IRA accounts with small balances but waive the fee if the balance is large. So it is best to keep your Roth IRA in just one or two funds with just one or two custodians until such time as investment returns plus additional contributions made over the years makes the balances large enough to diversify further. Remember also that you cannot contribute the maximum to each IRA; the sum total of all your IRA contributions (doesn't matter whether to Roth or to Traditional IRAs) for any year must satisfy the limit for that year. You can move money from one IRA of yours to another IRA (of the same type) of yours without any tax issues to worry about. Such movements (called rollovers or transfers) are  not contributions and do not count towards the annual contribution limit. The easiest way to do move money from one IRA account to another IRA account is by a trustee-to-trustee transfer where the money goes directly from one custodian (American Funds in this case) to the other custodian (Vanguard in this case). The easiest way of accomplishing this is to call Vanguard or go online on their website, tell them that you are wanting to  establish a Roth IRA with them, and that you want to fund it by transferring money held in a Roth IRA with American Funds. Give Vanguard the account  number of your existing American Funds IRA, tell them how much  you want to transfer over -- $1000 or $20,000 or the entire balance as the case may be -- and tell Vanguard to go get the money.  In a few days' time, the money will appear in your new Vanguard Roth IRA and the American Funds Roth IRA will have a smaller balance, possibly a zero balance, or might even be closed if you told Vanguard to collect the entire balance.  DO NOT approach American Funds and tell them that you want to transfer money to a new Roth IRA with Vanguard: they will bitch and moan and drag their heels about doing so because  they are unhappy to lose your business, and will probably screw up the transfer. Talk to Vanguard only. They are eager to get their hands on your IRA money and will gladly take care of the whole thing for you at no charge to you. DO NOT cash in any stock shares, or mutual fund shares, or whatever is in your Roth IRA in preparation for ""cashing out of the old account"". There is a method where you take a ""rollover distribution"" from your American Funds Roth IRA and then deposit the money into your new Vanguard Roth IRA within 60 days, but I recommend most strongly against using this because too many people manage to screw it up. It is 60 days, not two months; the clock starts from the day American Funds cuts your check, not when you get the check, and it is stopped when the money gets deposited into your new account, not the day you mailed the check to Vanguard or the day that Vanguard received it,  and so on. In short, DO NOT try this at home:  stick to a trustee-to-trustee transfer and avoid the hassles." If your SIMPLE IRA is over two years old then you can roll your money to another qualified account such as a rollover IRA. The usual rollover rules apply. You have 60 days to deposit the funds in another qualified account and you are only allowed one such rollover in a 12 month window. If you are still within two years of opening your SIMPLE IRA, you can roll your funds to a SIMPLE IRA with another vendor, but you would then have to wait until that account is two years old before rolling it elsewhere. If you roll the money another type of IRA before your SIMPLE IRA account is two-years old, and under 59 1/2 years old, you will be subject to a 25% penalty (which is much higher than for other types of accounts). Many of the early distribution exceptions apply such as disability, etc. Edit: The first document linked above covers rules for running a SIMPLE IRA. All the specific regulations linked in the second document apply to all IRAs of all types. There is no specific prohibition from rolling only a portion of the money to another qualified account. There are prohibitions against rolling money more than one time in a 12 month period. The usual obstacle to rolling money from a retirement account--like a 401(k)--is that the 401(k) plan is written to prohibit withdrawals while the employee is still employed at the company. "The IRA contribution limit is a limit on the total amount you can contribute to all of your Roth and traditional IRAs.  It's not a per-account limit.  (See here and here.)  Once you've hit the contribution limit on one account, you've hit it on all of them. Even so, supposing you had a reason with try to take money out of one of the accounts, the answer to your question is ""sort of"".  The limit is a limit on your gross contributions, not your net contributions.  It is possible to withdraw Roth contributions if you do so before the tax filing deadline for that year, but you must also withdraw (and pay taxes on) any earnings accured during the time the money was in the Roth (see here).  In addition, doing this may not be as simple as just taking the money out of your account; you should probably ask your bank about it and let them know you're ""undoing"" the contribution, since they may otherwise still record the amount as a real contribution and the withdrawal as unqualified early withdrawal (subject to penalties, etc.)." "If I understand correctly, the Traditional IRA, if you have 401k with an employer already, has the following features: Actually, #1 and #2 are characteristics of Roth IRAs, not Traditional IRAs. Only #3 is a characteristic of a Traditional IRA. Whether you have a 401(k) with your employer or not makes absolutely no difference in how your IRAs are taxed for the vast majority of people. (The rules for IRAs are different if you have a very high income, though). You're allowed to have and contribute to both kinds of accounts. (In fact, I personally have both). Traditional IRAs are tax deferred (not tax-free as people sometimes mistakenly call them - they're very different), meaning that you don't have to pay taxes on the contributions or profits you make inside the account (e.g. from dividends, interest, profits from stock you sell, etc.). Rather, you pay taxes on any money you withdraw. For Roth IRAs, the contributions are taxed, but you never have to pay taxes on the money inside the account again. That means that any money you get over and above the contributions (e.g. through interest, trading profits, dividends, etc.) are genuinely tax-free. Also, if you leave any of the money to people, they don't have to pay any taxes, either. Important point: There are no tax-free retirement accounts in the U.S. The distinction between different kinds of IRAs basically boils down to ""pay now or pay later."" Many people make expensive mistakes in their retirement strategy by not understanding that point. Please note that this applies equally to Traditional and Roth 401(k)s as well. You can have Roth 401(k)s and Traditional 401(k)s just like you can have Roth IRAs and Traditional IRAs. The same terminology and logic applies to both kinds of accounts. As far as I know, there aren't major differences tax-wise between them, with two exceptions - you're allowed to contribute more money to a 401(k) per year, and you're allowed to have a 401(k) even if you have a high income. (By way of contrast, people with very high incomes generally aren't allowed to open IRAs). A primary advantage of a Traditional IRA is that you can (in theory, at least) afford to contribute more money to it due to the tax break you're getting. Also, you can defer taxes on any profits you make (e.g. through dividends or selling stock at a profit), so you can grow your money faster." Once upon a time, money rolled over from a 401k or 403b plan into an IRA could not be rolled into another 401k or 403b unless the IRA account was properly titled as a Rollover IRA (instead of Traditional IRA - Roth IRAs were still in the future) and the money kept separate (not commingled) with contributions to Traditional IRAs. Much of that has fallen by the way side as the rules have become more relaxed.  Also the desire to roll over  money into a 401k plan at one's new job has decreased too --  far too many employer-sponsored retirement plans have large management fees and the investments are rarely the best available: one can generally do better  keeping ex-401k money outside a new 401k, though of course new  contributions from salary earned at the new employer perforce must be put into the employer's 401k. While consolidating one's IRA accounts at one brokerage or one fund family certainly saves on the paperwork, it is worth keeping in mind that putting all one's eggs in one basket might not be the best idea, especially for those concerned that an employee might, like Matilda, take me money and run Venezuela. Another issue is that while one may have diversified investments at the brokerage or fund family, the entire IRA must have the same set of beneficiaries: one cannot leave the money invested in GM stock (or Fund A) to one person and the money invested in Ford stock (or Fund B) to  another if one so desires.  Thinking far ahead into the future, if one is interested in making charitable bequests, it is the best strategy tax-wise to make these bequests from tax-deferred monies rather than from post-tax money. Since IRAs pass outside the will, one can keep separate IRA accounts with different companies, with, say, the Vanguard IRA having primary beneficiary United Way and the Fidelity IRA having primary beneficiary the American Cancer Society, etc. to achieve the appropriate charitable bequests. The main restrictions you see with IRA's involve contributions, and not the actual investments themselves. I would be indifferent to having a single investment across multiple accounts. It might be a bit trickier to manage, especially if your strategy involves some specific asset allocation. Other than account management though, there's no big issue. "I would like to buy hubby a beer and talk some sense into him.  Do you have 2 years gross income saved as your retirement balance? That's about where he should be at age 30. I wrote about this in an article Retirement Savings Ratio.  Blowing the 401(k) for anything less than an extreme emergency is downright foolish.  The decision whether to roll it to an IRA or the new account isn't so simple. If you roll it to new plan, yes you can borrow, up to 60 months at a low rate, 4% or so. Taking the cash and then making an IRA deposit just means paying the penalty for nothing, unless you manage it just right, depositing the amount within 60 day, etc. You don't mention what he wants to do with it. You need to sit down and have a long ""money talk.""  Keep in mind, if you oversave, it's easy to retire early, or at 50 just stop saving, spend every new dime. But it's something else to turn 50 and realize you will have to work till you die. I've seen both situations. (I am 48, the Mrs, 54 our multiple is now 13. The target is 20 to retire. The house is not counted as it can't be spent. The mortgage IS counted as it must be paid) Edit - as I read this again, I see the OP asked about opening an IRA in the same year they withdraw the 401(k) and pay tax and penalty. Wow. I also see her user reverted to generic, which means, I think, she's never returned. I hope they made the right decision, to keep the money in retirement accounts. Hubby never even said what he wanted the money for." "The limit on SEP IRA is 25%, not 20%.  If you're self-employed (filing on Schedule C), then it's taken on net earning, which in your example would be 25% of $90,000. (https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people) JoeTaxpayer is correct as regards the 401(k) limits.  The elective deferrals are per person - That's a cap in sum across multiple plans and across both traditional and Roth if you have those.  In general, it's actually across other retirement plan types too - See below. If you're self-employed and set-up a 401(k) for your own business, the elective deferral is still aggregated with any other 401(k) plans in which you participate that year, but you can still make the employer contribution on your own plan. This IRS page is current a pretty good one on this topic:  https://www.irs.gov/retirement-plans/one-participant-401k-plans Key quotes that are relevant: The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both: •Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit:  ◦$18,000 in 2015 and 2016, or $24,000 in 2015 and 2016 if age 50 or over; plus •Employer nonelective contributions up to:  ◦25% of compensation as defined by the plan, or ◦for self-employed individuals, see discussion below It continues with this example: The amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $18,000 in 2015 and 2016. Although a plan's terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans. EXAMPLE Ben, age 51, earned $50,000 in W-2 wages from his S Corporation in 2015. He deferred $18,000 in regular elective deferrals plus $6,000 in catch-up contributions to the 401(k) plan. His business contributed 25% of his compensation to the plan, $12,500. Total contributions to the plan for 2015 were $36,500. This is the maximum that can be contributed to the plan for Ben for 2015. A business owner who is also employed by a second company and participating in its 401(k) plan should bear in mind that his limits on elective deferrals are by person, not by plan. He must consider the limit for all elective deferrals he makes during a year. Notice in the example that Ben contributed more that than his elective limit in total (his was $24,000 in the example because he was old enough for the $6,000 catch-up in addition to the $18,000 that applies to everyone else).  He did this by declaring an employer contribution of $12,500, which was limited by his compensation but not by any of his elective contributions. Beyond the 401(k), keep in mind that elective contributions are capped across different types of retirement plans as well, so if you have a SEP IRA and a solo 401(k), your total contributions across those plans are also capped.  That's also mentioned in the example. Now to the extent that you're considering different types of plans, that's a whole question in itself - One that might be worth consulting a dedicated tax advisor.  A few things to consider (not extensive list): As for payroll / self-employment tax: Looks like you will end up paying Medicare, including the new ""Additional Medicare"" tax that came with the ACA, but not SS: If you have wages, as well as self-employment   earnings, the tax on your wages is paid first.   But this rule only applies if your total earnings   are more than $118,500. For example, if you   will have $30,000 in wages and $40,000 in selfemployment   income in 2016, you will pay the   appropriate Social Security taxes on both your   wages and business earnings. In 2016, however,   if your wages are $78,000, and you have $40,700   in net earnings from a business, you don’t pay   dual Social Security taxes on earnings more   than $118,500. Your employer will withhold   7.65 percent in Social Security and Medicare   taxes on your $78,000 in earnings. You must   pay 15.3 percent in Social Security and Medicare   taxes on your first $40,500 in self-employment   earnings and 2.9 percent in Medicare tax on the   remaining $200 in net earnings. https://www.ssa.gov/pubs/EN-05-10022.pdf Other good IRS resources:"