Add $5000 to existing retirement account
You cannot contribute directly to that 401k account if you no longer work at the sponsoring company - you have to be on their payroll.  You can, however, roll the 401k over into an IRA, and contribute to the IRA. Note that in both cases, you are only allowed to contribute from earned income (which includes all the taxable income and wages you get from working or from running your own business). As long as you are employed (and have made more than $5k this year) you should have no problem. I am not certain whether contributing your $5k to a roth IRA would help you achieve your tax goals, someone else here certainly can advise.
You do not need to have 'high net value', and yes, you can invest in it. Typically, fund companies require a minimum investment, that could be 100, it could be a 1000. 5000 should be enough for 99.9 % of all funds for an initial investment. What you need is an investment company that manages the account for you. I cannot name those for your country, but they should be easy to find (companies like IMG, and Fidelity might serve your country). You then open an account with the company of your choice, transfer the money, and tell them which fund it shall go in; all this is possible online. You can also go to see an agent in person, and he will fill the forms for you, and handle all the action, but he might take a fee for it. One year is short term -- short enough that trying to predict returns is a crap shoot. Frankly, if you will need the money in one year I wouldn't touch anything riskier than a money market account. $5000 also isn't enough to give you much flexibility in achieving a balanced portfolio, since the minimal initial purchase for mutual funds is often around $2500. (I'm not sure whether ETFs would give you any more flexibility.) So on grounds of both size and time horizon, I have to recommend against this plan. The risk of losing money, with insufficient time for gains to balance that risk, is simply too high. Others may feel differently, of course. But that's the best advice I can offer. "You have several questions in your post so I'll deal with them individually: Is taking small sums from your IRA really that detrimental? I mean as far as tax is concerned? Percentage wise, you pay the tax on the amount plus a 10% penalty, plus the opportunity cost of the gains that the money would have gotten.  At 6% growth annually, in 5 years that's more than a 34% loss.  There are much cheaper ways to get funds than tapping your IRA. Isn't the 10% ""penalty"" really to cover SS and the medicare tax that you did not pay before putting money into your retirement? No - you still pay SS and medicare on your gross income - 401(k) contributions just reduce how much you pay in income tax.  The 10% penalty is to dissuade you from using retirement money before you retire. If I ... contributed that to my IRA before taxes (including SS and medicare tax) that money would gain 6% interest. Again, you would still pay SS and Medicare, and like you say there's no guarantee that you'll earn 6% on your money.  I don't think you can pay taxes up front when making an early withdrawal from an IRA can you?  This one you got right.  When you file your taxes, your IRA contributions for the year are totaled up and are deducted from your gross income for tax purposes. There's no tax effect when you make the contribution. Would it not be better to contribute that $5500 to my IRA and if I didn't need it, great, let it grow but if I did need it toward the end of the year, do an early withdrawal? So what do you plan your tax withholdings against?  Do you plan on keeping it there (reducing your withholdings) and pay a big tax bill (plus possibly penalties) if you ""need it""?  Or do you plan to take it out and have a big refund when you file your taxes? You might be better off saving that up in a savings account during the year, and if at the end of the year you didn't use it, then make an IRA contribution, which will lower the taxes you pay.  Don't use your IRA as a ""hopeful"" savings account. So if I needed to withdrawal $5500 and I am in the 25% tax bracket, I would owe the government $1925 in taxes+ 10% penalty. So if I withdrew $7425 to cover the tax and penalty, I would then be taxed $2600 (an additional $675). Sounds like a cat chasing it's tail trying to cover the tax. Yes if you take a withdrawal to pay the taxes. If you pay the tax with non-retirement money then the cycle stops. how can I make a withdrawal from an IRA without having to pay tax on tax. Pay cash for the tax and penalty rather then taking another withdrawal to pay the tax.  If you can't afford the tax and penalty in cash, then don't withdraw at all. based on this year's W-2 form, I had an accountant do my taxes and the $27K loan was added as earned income then in another block there was the $2700 amount for the penalty. So you paid 25% in income tax for the earned income and an additional 10% penalty.  So in your case it was a 35% overall ""tax"" instead of the 40% rule of thumb (since many people are in 28% and 35% tax brackets) The bottom line is it sounds like you are completely unorganized and have absolutely no margin to cover any unexpected expenses.  I would stop contributing to retirement today until you can get control of your spending, get on a budget, and stop trying to use your IRA as a piggy bank.  If you don't plan on using the money for retirement then don't put it in an IRA.  Stop borrowing from it and getting into further binds that force you to make bad financial decisions. You don't go into detail about any other aspects (mortgage? car loans? consumer debt?) to even begin to know where the real problem is.  So you need to write everything down that you own and you owe, write out your monthly expenses and income, and figure out what you can cut if needed in order to build up some cash savings. Until then, you're driving across country in a car with no tires, worrying about which highway will give you the best gas mileage." Okay thanks, let's hope it's a relatively painless process to correct my mistake!   Really odd that my 401(k)s are traditional, I was so sure they weren't.  Maybe it's better then to open up a traditional IRA alongside the Roth, use that for rollovers, and just kick a few bucks into the Roth on occasion? As you move toward retirement, your portfolio is supposed to move toward low risk, stable investments, more bonds, less stocks, etc.  Your question implies that you want to increase your income, most likely because your income is not satisfying your desires. First, any idea that you have that risks your savings, just eliminate it.  You are not able to replace those savings.  The time for those kind of plays has passed. However, you can improve your situation.  Do random odd jobs.  Find a part time job that you're willing to do for 10 hours a week or something.  Keep this money separate from your retirement savings.  Research the stock trades you would like to make and use that 'extra' money to play in the market.  Set a rule that you do not touch your nest egg for trading.  You may find that being retired gives you the time to do the #1 thing that helps investors make good investments -- research. Then when you make your first million doing this, write a book.  If you call it Retire - And Then Get Rich, I expect royalties and a dedication. "You have a few options: Option #1 - Leave the money where it is If your balance is over $5k - you should be able to leave the money in your former-employer's 401(k). The money will stay there and continue to be invested in the funds that you elect to invest in. You should at the very least be receiving quarterly statements for the account. Even better - you should have access to some type of an online account where you can transfer your investments, rebalance your account, conform to target, etc. If you do not have online account access than I'm sure you can still transfer investments and make trades via a paper form. Just reach out to the 401(k) TPA or Recordkeeper that administers your plan. Their contact info is on the quarterly statements you should be receiving. Option #2 - Rollover the money into your current employer's 401(k) plan. This is the option that I tend to recommend the most. Roll the money over into your current employer's 401(k) plan - this way all the money is in the same place and is invested in the funds that you elect. Let's say you wanted to transfer your investments to a new fund lineup. Right now - you have to fill out the paperwork or go through the online process twice (for both accounts). Moving the money to your current-employer's plan and having all the money in the same place eliminates this redundancy, and allows you to make one simple transfer of all your assets. Option #3 - Roll the money from your former-employer's plan into an IRA. This is a cool option, because now you have a new IRA with a new set of dollar limits. You can roll the money into a separate IRA - and contribute an additional $5,500 (or $6,500 if you are 50+ years of age). So this is cool because it gives you a chance to save even more for retirement. Many IRA companies give you a ""sign on bonus"" where if you rollover your former-employers 401(k)...they will give you a bonus (typically a few hundred bucks - but hey its free money!). Other things to note: Take a look at your plan document from your former-employer's 401(k) plan. Take a look at the fees. Compare the fees to your current-employer's plan. There could be a chance that the fees from your former-employer's plan are much higher than your current-employer. So this would just be yet another reason to move the money to your current-employer's plan. Don't forget you most likely have a financial advisor that oversees your current-employer's 401(k) plan. This financial advisor also probably takes fees from your account. So use his services! You are probably already paying for it! Talk to your HR at your employer and ask who the investment advisor is. Call the advisor and set up an appointment to talk about your retirement and financial goals. Ask him for his advice - its always nice talking to someone with experience face to face. Good luck with everything!" "If you have enough earned income to cover this amount you should be all set. If I understand you correctly you proposed two transactions. The first, a withdrawal from the beneficiary IRA. Some of which is an RMD the rest is an extra withdrawal of funds.  Next, you propose to make a deposit to a combination of your IRA and your wife's IRA. As long as there's earned income to cover this deposit, your plan is fine.  To be clear, you can't ""take a bene IRA and deposit the RMD to an IRA."" But, money is fungible, the dollars you deposit aren't traceable, only need to be justified by enough earned income. A bene IRA is a great way to get the money to increase your own IRA or 401(k) deposits.  Further details - The 2016 contribution limit is $5,500 per person, so I did make the assumption you knew the $9000 deposit need to be split between the 2 IRAs, with no more than $5500 going into either one." I have about $1K in savings, and have been told that you should get into investment and saving for retirement early. I make around $200 per week, which about $150 goes into savings. That's $10k per year.  The general rule of thumb is that you should have six months income as an emergency fund.  So your savings should be around $5k.  Build that first.   Some argue that the standard should be six months of living expenses rather than income.  Personally, I think that this example is exactly why it is income rather than living expenses.  Six months of living expenses in this case would only be $1250, which won't pay for much.  And note that living expenses can only be calculated after the fact.  If your estimate of $50 a week is overly optimistic, you might not notice for months (until some large living expense pops up).   Another problem with using living expenses as the measure is that if you hold down your living expenses to maximize your savings, this helps both measures.  Then you hit your savings target, and your living expenses increase.  So you need more savings.  By contrast, if your income increases but your living expenses do not, you still need more savings but you can also save more money.  Doesn't really change the basic analysis though.  Either way you have an emergency savings target that you should hit before starting your retirement savings.   If you save $150 per week, then you should have around $4k in savings at the beginning of next year.  That's still low for an emergency fund by the income standard.  So you probably shouldn't invest next year.  With a living expenses standard, you could have $6250 in savings by April 15th (deadline for an IRA contribution that appears in the previous tax year).  That's $5000 more than the $1250 emergency fund, so you could afford an IRA (probably a Roth) that year.   If you save $7500 next year and start with $4k in savings (under the income standard for emergency savings), that would leave you with $11,500.  Take $5500 of that and invest in an IRA, probably a Roth.  After that, you could make a $100 deposit per week for the next year.  Or just wait until the end.   If you invested in an IRA the previous year because you decided use the living expenses standard, you would only have $6500 at the end of the year.  If you wait until you have $6750, you could max out your IRA contribution.  At that point, your excess income for each year would be larger than the maximum IRA contribution, so you could max it out until your circumstances change.   If you don't actually save $3k this year and $7500 next year, don't sweat it.  A college education is enough of an investment at your age.  Do that first, then emergency savings, then retirement.   That will flip around once you get a better paying, long term job.  Then you should include retirement savings as an expected cost.  So you'd pay the minimum required for your education loans and other required living expenses, then dedicate an amount for retirement savings, then build your emergency savings, then pay off your education loans (above the minimum payment).  This is where it can pay to use the more aggressive living expenses standard, as that allows you to pay off your education loans faster.   I would invest retirement savings in a nice, diversified index fund (or two since maintaining the correct stock/bond mix of 70%-75% stocks is less risky than investing in just bonds much less just stocks).  Investing in individual stocks is something you should do with excess money that you can afford to lose.  Secure your retirement first.  Then stock investments are gravy if they pan out.  If they don't, you're still all right.  But if they do, you can make bigger decisions, e.g. buying a house.   Realize that buying individual stocks is about more than just buying an app.  You have to both check the fundamentals (which the app can help you do) and find other reasons to buy a stock.  If you rely on an app, then you're essentially joining everyone else using that app.  You'll make the same profit as everyone else, which won't be much because you all share the profit opportunities with the app's system.  If you want to use someone else's system, stick with mutual funds.  The app system is actually more dangerous in the long term.   Early in the app's life cycle, its system can produce positive returns because a small number of people are sharing the benefits of that system.  As more people adopt it though, the total possible returns stay the same.  At some point, users saturate the app.  All the possible returns are realized.  Then users are competing with each other for returns.  The per user returns will shrink as usage grows.   If you have your own system, then you are competing with fewer people for the returns from it.  Share the fundamental analysis, but pick your stocks based on other criteria.  Fundamental analysis will tell you if a stock is overvalued.  The other criteria will tell you which undervalued stock to buy. "The standard interpretation of ""can I afford to retire"" is ""can I live on just the income from my savings, never touching the principal."" To estimate that, you need to make reasonable guesses about the return you expect, the rate of inflation, your real costs -- remember to allow for medical emergencies, major house repairs, and the like when determining you average needs, not to mention taxes if this isn't all tax-sheltered! -- and then build in a safety factor. You said liquid assets, and that's correct; you don't want to be forced into a reverse mortgage by anything short of a disaster. An old rule of thumb was that -- properly invested -- you could expect about 4% real return after subtracting inflation. That may or may not still be correct, but it makes an easy starting point. If we take your number of $50k/year (today's dollars) and assume you've included all the tax and contingency amounts, that means your nest egg needs to be 50k/.04, or $1,250,000. (I'm figuring I need at least $1.8M liquid assets to retire.) The $1.5M you gave would, under this set of assumptions, allow drawing up to $60k/year, which gives you some hope that your holdings would mot just maintain themselves but grow, giving you additional buffer against emergencies later. Having said that: some folks have suggested that, given what the market is currently doing, it might be wiser to assume smaller average returns. Or you may make different assumptions about inflation, or want a larger emergency buffer. That's all judgement calls, based on your best guesses about the economy in general and your investments in particular.  A good financial advisor (not a broker) will have access to better tools for exploring this, using techniques like monte-carlo simulation to try to estimate both best and worst cases, and can thus give you a somewhat more reliable answer than this rule-of-thumb approach. But that's still probabilities, not promises. Another way to test it: Find out how much an insurance company would want as the price of an open-ended inflation-adjusted $50k-a-year annuity. Making these estimates is their business; if they can't make a good guess, nobody can. Admittedly they're also factoring the odds of your dying early into the mix, but on the other hand they're also planning on making a profit from the deal, so their number might be a reasonable one for ""self-insuring"" too. Or might not. Or you might decide that it's worth buying an annuity for part or all of this, paying them to absorb the risk. In the end, ""ya pays yer money and takes yer cherce.""" "This may be a lame answer, but the best IRA contribution strategy is the one that will actually stick to. A single lump sum contribution every year may be a difficult thing for you to maintain.  When it's time to make your contribution, you may say ""eh, $5000 is a lot of money, and my checking account balance is kinda low, I'll wait before I contribute"".  You keep putting it off, and then you miss the opportunity for the year. If you setup small regular automatic withdrawals, your IRA contribution will run on auto-pilot.  Depending on your cash flow, this may not be favorable, though." You can put them in a 5 years CD and getting a maximum of %2.5 APY if you're lucky. If you put 15k now, in 5 years you'll have $1.971. If it sounds good then take a look at the current inflation rate (i'm in usa)... If you want to think about retirement then you should open a Roth IRA. But you won't be able to touch the money without penalties (10% of earnings) before you get 59 1/2 years old. Another option would be to open a regular investment account with an online discounted broker. Which one? Well, this should be a totally separate question... If you decide to invest (Roth IRA or regular account) and you're young and inexperienced then go for a balanced mutual fund. Still do a lot of research to determine your portfolio allocation or which fund is best suited for you. Betterment (i never used it) is a no brainer investment broker.  Please don't leave them in a generic checking or low interest savings account because you'll save nothing (see inflation again)... Short answer is fund a Roth.   If you are under 50 then you can put in $5500 or $6500 if you are older. Great to have money in two buckets one pre tax and one post tax.  Plus you can be aggressive putting money in it because you can always take money you put in the Roth out of the Roth with no tax or penalty.   Taxes are historically low so it makes a lot of sense to diversify your retirement. Are you obligated to do what they ask? Probably not, with one big caveat discussed below. Your employer sent your money and their money after every paycheck to the 401K management company. Then after a while the 401K management company followed your instructions to roll it over into an IRA. Now the IRA management company has it. Pulling it out of the IRA would be very hard, and the IRA company would be required to report it to the IRS as a withdraw. Here is the caveat. If the extra funds you put in allowed you to exceed the annual contribution amount set by the law, or if it allowed you to put more than 100% of your income into the fund, then this would be an excess contribution, and you and your employer would have to resolve or face the excess contribution penalties. Though if the 401K company and HR allowed you to exceed the annual limit they have a much more complex problem with their payroll system. The bigger concern is why they want you to pull out your $27.50 and their $27.50. Unless you were hitting the maximum limit, your $27.50 could have been invested by adjusting the percentage taken out of each check.  You could have picked a percentage to reach a goal. That money is yours because you contributed it and unless you exceed the IRS set limits it is still pre-tax retirement money. The return of matching funds may be harder to calculate. The returns for 2013 were very good. Each $1.06 of matching funds each paycheck purchased a fraction of some investment. That investment went up and down, ok mostly up, if it was invested in the broad market. I guess you should be glad they aren't asking for more due to the increase in value.  It would be very hard to calculate what happened if you have moved it around since then. Which of course you did when you moved it into an IRA. If the average employee was also given a $55 gift last year, then the suggestion to the employer is that the tax complexity you and your fellow employees face would exceed the cost of the extra funds. They should chalk it up to an expensive lesson and move on. Congratulations on deciding to save for retirement. Since you cite Dave Ramsey as the source of your 15% number, what does he have to say about where to invest the money? If you want to have instantaneous penalty-free access to  your retirement money, all you need to do is set up one or more ordinary accounts that you think of  as your retirement money. Just be careful not to  put the money into CDs since Federal law requires a penalty of three months interest if you cash in the CD before its maturity date (penalty!) or put the money into those pesky mutual funds that charge a redemption fee (penalty!) if you take the money out within x months of investing it where x can be anywhere from 3 to 24 or more. In Federal tax law (and in most state tax laws as well) a retirement account has special privileges accorded to it in that the interest, dividends, capital gains, etc earned on the money in your retirement account are not taxed in the year earned (as they would be in a non-retirement account), but the tax is  either deferred till you withdraw money from the  account (Traditional IRAs, 401ks etc) or is waived completely (Roth IRAs, Roth 401ks etc). In return for this special treatment, penalties are imposed (in addition to tax) if you withdraw money from your retirement account before age 59.5 which presumably is on the distant horizon for you. (There are some exceptions (including first-time home buying and extraordinary medical expenses) to this rule that I won't bother going into). But You are not required to invest your retirement   money into such a specially privileged retirement   account. It is perfectly legal to keep your retirement money   in an ordinary savings account if you wish, and pay taxes on the   interest each year.  You can invest your retirement   money into municipal bonds whose interest is free of   Federal tax (and usually free of state tax as well   if the municipality is located in your state of   residence) if you like. You can keep your retirement money in a   sock under your mattress if you like, or buy a   collectible item (e.g. a painting) with it   (this is not permitted in an IRA), etc. In short, if you are concerned about the penalties imposed by retirement accounts on early withdrawals, forgo the benefits of these accounts and put your retirement money elsewhere where there is no penalty for instant access.  If you use a money management program such as Mint or Quicken, all you need to do is name one or more accounts or a portfolio as MyRetirementMoney and voila, it is done. But those accounts/portfolios don't have to be retirement accounts in the sense of tax law; they can be anything at all. First, you should diversify your portfolio.  If your entire portfolio is in the Roth IRA, then you should eventually diversify that.  However, if you have an IRA and a 401k, then it's perfectly fine for the IRA to be in a single fund.  For example, I used my IRA to buy a riskier REIT that my 401k doesn't support.   Second, if you only have a small amount currently invested, e.g. $5500, it may make sense to put everything in a single fund until you have enough to get past the low balance fees.  It's not uncommon for funds to charge lower fees to someone who has $8000, $10,000, or $12,000 invested.  Note that if you deposit $10,000 and the fund loses money, they'll usually charge you the rate for less than $10,000.  So try to exceed the minimum with a decent cushion.   A balanced fund may make sense as a first fund.  That way they handle the diversification for you.  A targeted fund is a special kind of balanced fund that changes the balance over time.  Some have reported that targeted funds charge higher fees.  Commissions on those higher fees may explain why your bank wants you to buy.   I personally don't like the asset mixes that I've seen from targeted funds.  They often change the stock/bond ratio, which is not really correct.  The stock/bond ratio should stay the same.  It's the securities (stocks and bonds) to monetary equivalents that should change, and that only starting five to ten years before retirement.  Prior to that the only reason to put money into monetary equivalents is to provide time to pick the right securities fund.  Retirees should maintain about a five year cushion in monetary equivalents so as not to be forced to sell into a bad market.   Long term, I'd prefer low-load index funds.  A bond fund and two or three stock funds.  You might want to build your balance first though.  It doesn't really make sense to have a separate fund until you have enough money to get the best fees.  70-75% stocks and 25-30% bonds (should add to 100%, e.g. 73% and 27%).  Balance annually when you make your new deposit.