If I make over 120k a year, what are my options for retirement plans?
All data for a single adult in tax year 2010. Roth IRA  401K Roth 401k Traditional IRA and your employer offers a 401k Traditional IRA and your employer does NOT offer a 401k So, here are your options. If you have a 401k at work, you could max that out.  If you make close to $120K, you could reduce your AGI enough to contribute to a Roth IRA. If you do not have a 401k at work, you could contribute to a Traditional IRA and deduct the $5K from your AGI similar to how a 401k works. Other than that, I think you are looking at investing outside of a retirement plan which means more flexibility, but no tax advantage. "First off, high five on the paycheck.  There are a few retirement issues to deal with. 401k issues - At that income level, you will probably fall into the ""Highly Compensated Employee"" category, which means things get a little more complicated, both for you and your employer.  (Wikipedia link) IRA issues - As you already realized, you make too much to directly open and contribute to a Roth IRA.  You can open a Traditional IRA, however.  Your income is already over the limit for Traditional IRA deduction (bummer), so it would seem there is little point to opening an IRA at all. However, there is a way to take advantage of a Roth IRA, even at your income level.  It is possible to convert a Traditional IRA into a Roth IRA.  There used to be income limits on the ability to do the conversion, which would have normally made this off limits to you.  Starting in 2010, the income limit is removed, so you can do this. Basically, you open a Traditional IRA, max it out, then convert it to a Roth.  Since there was no income deduction, you shouldn't have to pay any more taxes.  (link) Disclaimer: I've never tried this, nor do I know anyone who has, so you might want to research it a bit more before you try it yourself." Put in the maximum you can into the 401(k), the limit should be $16,500 so long as the highly compensated rules don't kick in. Since you cannot deduct the traditional IRA, it's a great option to deposit to a traditional IRA and immediately convert that balance to a Roth account. That puts you at $21,500/yr saved, nearly 18%.  There's nothing stopping you from investing outside these accounts. A nice ETF with low expenses, investing in a stock index (I am thinking SPY for the S&P 500) is great to accumulate long term. There are three common options for you: The other alternative: just invest it in tax-efficient investments. You will have limited tax-deferral options outside of your 401k, but don't let that limit you. You can invest in a variety of ETFs, stocks and mutual funds for growth, and tax-free investments like municipal bonds as you get older and need to draw income. You can contribute to a Traditional IRA instead of a Roth.  The main difference is a contribution to a Roth is made with after tax money but at retirement you can withdraw the money tax free.  With a Traditional IRA your contribution is tax-deductible but at retirement the withdrawal is not tax free.  This is why most people prefer a Roth if they can contribute. You can also contribute to your work's 401k plan assuming they have one.  And you can always save for retirement in a regular account.
Does the 457(b) plan allow for the rollover of other retirement funds into it? And do you have very specific reasons for wanting to roll over your SEP-IRA into the 457(b) plan instead of into some other IRA plan with a different custodian? For example, if you already have a Traditional IRA, is there any reason why your SEP-IRA should not be rolled over into the Traditional IRA? With regard to the question about separate accounts, once upon a time, rolling over money from an employment retirement plan (e.g. 401k) into a Traditional IRA required establishing a separate account called a Rollover Traditional IRA so that the rolled-over money (and the earnings thereon) were not commingled with standard traditional IRA money resulting from personal contributions). This was so that the account owner had the option of rolling over the separately kept money into a new employer's retirement plan (if such a rollover was permitted by the new 401k plan). If one did not want to ever roll over money into a new employer plan, one had to write a letter to the custodian telling them that commingling was OK; you never wanted to put that money into another 401k plan. The law changed some time later and the concept of Rollover IRAs holding non-commingled funds has disappeared.  With that as prologue, my answer to your question is that perhaps the law did not change with respect to 457(b) plans, and so the money that you want to rollover into the 457(b) plan needs to be kept separate and not commingled with your contributions via payroll deduction to the 457(b) plan (in case you want to ever roll over the SEP-IRA money into another SEP-IRA). Hence, separate accounts are needed: one to hold your SEP-IRA money and one to hold your contributions via payroll deductions. "Having worked for a financial company for years, my advice is to stay away from all the ""Freedom Funds"" offered.  They're a new way for Fidelity to justify charging a higher management fee on those particular funds.  That extra 1% or so a year is great for making the company money; it will kill your rate of return over the next 25+ years you're putting money into your retirement account.  All these funds do is change the percentage of your funds in stocks vs. more fixed investments (bonds, etc.) so you have a higher percentage in stocks while you're young and slowly move the percentage more towards fixed as you get older.  If you take a few hours every 5 years to re-balance your portfolio and just slowly shift more money towards fixed investments, you'll achieve the same thing WITHOUT the extra annual fee. So how much difference are we talking here?  Let's do a quick example.  Based on your salary of $70k and a 4% match by your company, you'll have $5,600 a year to put in your 401(k) (your 4% plus matched 4%).  I'll also assume an 8% annual return for both funds.  Here is what that 1% extra service charge will cost you: Fund with a 1% service charge: Annual Fee Paid Year 1 - $60.00 Annual Fee Paid Year 25 (assuming 8% growth in assets) - $301.00 Total Fees Year 1 through 25:  $3,782 Fund with a 2% service charge: Annual Fee Paid Year 1 - $121.00 Annual Fee Paid Year 25 (assuming 8% growth in assets) - $472.00 Total Fees Year 1 through 25:  $6,489 That's a total of $2,707 in extra fees over 25 years on just the investment you make this year!  Next year if you invest the same amount in your 401k that will be another $2,707 paid over 25 years to the management company.  This pattern repeats EACH year you pay the higher management fee.  Trust me, if you invest that money in stock instead of paying it as fees, you'll have a whole lot more money saved when it's time to retire. My advice, pick a percentage you're comfortable with in stocks at your age, maybe 85 - 90%, and pick the stock funds with the lowest management fees (the remaining 10 - 15% should go into a fixed fund).  Make sure you pick at least some of your stock money, I do 20 - 25%, and select a diverse (lots of different countries) international fund. For any retirement money you plan to save above the 4% getting matched by your company, set up a Roth IRA.  That will give you the freedom to invest in any stocks or funds you want.  Find some low-cost index funds (such as VTI for stocks, and BND for bonds) and put your money in those.  Invest the same amount every month, automatically, and your cost average will work itself out through up markets and down. Good luck!" "There are certain allowable reasons to withdraw money from a 401K.  The desire to free your money from a ""bad"" plan is not one of them.   A rollover is a special type of withdrawal that is only available after one leaves their current employer.  So as long as you stay with your current company, you cannot rollover.  [Exception: if you are over age  59.5] One option is to talk to HR, see if they can get a expansion of offerings.  You might have some suggestions for mutual funds that you would like to see.  The smaller the company the more likely you will have success here.  That being said, there is some research to support having few choices.  Too many choices intimidates people. It's quite popular to have ""target funds""  That is funds that target a certain retirement year.  Being that I will be 50 in 2016, I should invest in either a 2030 or 2035 fund.  These are a collection of funds that rebalances the investment as they age.  The closer one gets to retirement the more goes into bonds and less into stocks.   However, I think such rebalancing is not as smart as the experts say.  IMHO is almost always better off heavily invested in equity funds.  So this becomes a second option.  Invest in a Target fund that is meant for younger people.  In my case I would put into a 2060 or even 2065 target. As JoeTaxpayer pointed out, even in a plan that has high fees and poor choices one is often better off contributing up to the match.  Then one would go outside and contribute to an individual ROTH or IRA (income restrictions may apply), then back into the 401K until the desired amount is invested.   You could always move on to a different employer and ask some really good questions about their 401K.  Which leads me back to talking with HR.  With the current technology shortage, making a few tweaks to the 401K, is a very cheap way to make their employees happy. If you can score a 1099 contracting gig, you can do a SEP which allows up to a whopping 53K per year.  No match but with typically higher pay, sometimes overtime, and a high contribution limit you can easily make up for it." "Been here in Japan 12 years mate, and you're right, the investment options here suck. Be very wary of them, they will take all your money in outrageous fees--3% in and 3% out of some ""investment"" options. It's a scam. Send the money back home and manage it there. I recommend setting up a Vanguard account back in the UK, then you can invest in Vanguard index funds. Vanguard charges no commission for buying and selling their funds when you have a Vanguard account. I have nearly all my money there (Vanguard US), and I use the free Personal Capital online software to understand how to best manage the allocations in my portfolio. Of course you'll lose a bit of money on wire transfer fees, but you'll more than make up for it if in the long-term, and they may also be offset by currency rate anyway (right now the yen is strong, so a good time to use it to buy GBP). Also you may never need to send the money back to Japan unless you plan on retiring here." "In asnwer to your questions: As @joetaxpayer said, you really should look into a Solo 401(k). In 2017, this allows you to contribute up to $18k/year and your employer (the LLC) to contribute more, up to $54k/year total (subject to IRS rules). 401(k) usually have ROTH and traditional sides, just like IRA. I believe the employer-contributed funds also see less tax burden for both you and your LLC that if that same money had become salary (payroll taxes, etc.). You might start at irs.gov/retirement-plans/one-participant-401k-plans and go from there. ROTH vs. pre-tax: You can mix and match within years and between years. Figure out what income you want to have when you retire. Any year you expect to pay lower taxes (low income, kids, deductions, etc.), make ROTH contributions. Any year you expect high taxes (bonus, high wage, taxable capital gains, etc.), make pre-tax payments. I have had a uniformly bad experience with target date funds across multiple 401(k) plans from multiple plan adminstrators. They just don't perform well (a common problem with almost any actively managed fund). You probably don't want to deal with individual stocks in your retirement accounts, so rather pick passively managed index funds that track various markets segments you care about and just sit on them. For example, your high-risk money might be in fast-growing but volatile industries (e.g. tech, aerospace, medical), your medium-risk money might go in ""total market"" or S&P 500 index funds, and your low-risk money might go in treasury notes and bonds. The breakdown is up to you, but as an 18 year old you have a ~50 year horizon and so can afford to wait out anything short of another Great Depression (and maybe even that). So you'd want generally you want more or your money in the high-risk high-return  category, rebalancing to lower risk investments as you age. Diversifying into real estate, foreign investments, etc. might also make sense but I'm no expert on those." Is there any benefit to investing in a Roth 401(k) plan, as opposed to a Roth IRA?  They have separate contribution limits, so how much you contribute to one does not change the amount you can contribute to the other.  Which is relevant to your question because you said  the earnings on that account compounded over the next 40 years growing tax-free will be much higher than what I'd save on current taxes on a traditional 401(k).   This is only true if you max out your contribution limits.  If you start with the same amount of money and have the same marginal tax rate in both years, it doesn't matter which one you pick.   Start with $10,000 to invest.  With the traditional, you can invest all $10,000.  With the Roth, you pay taxes on it and then invest it.  Let's assume a tax rate of 25%.  So invest $7500.   Let's assume that you invest either amount long enough to double four times (forty years at 7% return after inflation is about right).  So the traditional has $160,000 and the Roth has $120,000.   Now you withdraw them.  For simplicity's sake, we'll pretend it's all one year.  It's probably over several years, but the math is easier in a single year.  With the Roth, you have $120,000.  With the traditional, you have to pay tax.  Again, let's assume 25%.  So that's $40,000, leaving you with $120,000 from the traditional.  That is the same amount as the Roth!   So it would make sense to  If you can max out both, great.  You do that for forty years and your retirement will be as financially secure as you can make it.  If you can't max them out, the most important thing is the employer match.  That's free money.  Then you may prefer your Roth IRA to the 401k.   Note that you can also roll over your Roth 401k to a Roth IRA.  Then you can withdraw your contributions from the Roth IRA without penalty or additional tax.  Alternate source.   Beyond answering your question, I would still like to reiterate that Roth or traditional does not have a big effect on your investment unless you max them out or you have different tax rates now versus in retirement.  It may change other things.  For example, you can roll over a Roth 401k to a Roth IRA without paying taxes.  And the Roth IRA will act like it was contributed directly.  You have to check with your employer what their rollover rules are.  They may allow it any time or only at employment separation (when you leave the job).   If you do max out your Roth accounts, then they will perform better than the traditional accounts at the same nominal contribution.  This is because they are tax free while your returns in the other accounts will have to pay taxes. But it doesn't matter until you hit the limits.  Until then, you could just invest the tax savings of the traditional as well as the money you could invest in a Roth. Does your employer provide a matching contribution to your 401k?  If so, contribute enough to the 401k that you can fully take advantage of the 401k match (e.g. if you employer matches 3% of your income, contribute 3% of your income).  It's free money, take advantage of it. Next up, max out your Roth IRA.  The limit is $5000 currently a year. After maxing your Roth, revisit your 401k.  You can contribute up to 16,500 per year. You savings account is a good place to keep a rainy day fund (do you have one?), but it lacks the tax advantages of a Roth IRA or 401k, so it is not really suitable for retirement savings (unless you have maxed out both your 401k and Roth IRA). Once you have take care of getting money into your 401k and Roth IRA accounts, the next step is investing it.  The specific investment options available to you will vary depending on who provides your retirement account(s), so these are general guidelines. Generally, you want to invest in higher-risk, higher-return investments when you are young.  This includes things like stocks and developing countries. As you get older (>30), you should look at moving some of your investments into things that less volatile.  Bond funds are the usual choice.  They tend to be safer than stocks (assuming you don't invest in Junk bonds), but your investment grows at a slower rate. Now this doesn't mean you immediately dump all of your stock and buy bonds.  Rather, it is a gradual transition over time.  As you get older and older, you gradually shift your investments to bond funds. A general rule of thumb I have seen: 100 - (YOUR AGE) = Percentage of your portfolio that should be in stocks Someone that is 30 would have 70% of their portfolio in stock, someone that is 40 would have 60% in stock, etc. As you get closer to retirement (50s-60s), you will want to start looking at investments that are more conservatie than bonds.  Start to look at fixed-income and money market funds. "Your employment status is not 100% clear from the question.  Normally, consultants are sole-proprietors or LLC's and are paid with 1099's.  They take care of their own taxes, often with schedule C, and they sometimes can but generally do not use ""employer"" company 401(k).  If this is your situation, you can contact any provider you want and set up your own solo 401(k), which will have great investment options and no fees.  I do this, through Fidelity. If you are paid with a W2, you are not a consultant.  You are an employee and must use your employer's 401(k). Figure out what you are. If you are a consultant, open a solo 401(k) at the provider of your choice.  Make sure beforehand that they allow incoming rollovers.  Roll all of your previous 401(k)s and IRA's into it. When you have moved your 401(k) to a better provider, you won't be paying any extra fees, but you will not recoup any fees your original provider charged. I'm not sure why you mention a Roth IRA.  If you try to roll your 401(k) into a Roth instead of a traditional IRA or 401(k), be aware that you will be taxed on everything you roll. ---- Edit: a little info about IRA's in response to your comment ---- Tax advantaged retirement accounts come in two flavors: one is managed by your company and the money is taken out of your paycheck.  This is usually a 401(k) or 403(b).  You can contribute up to $18K per year and your company can also contribute to it.  The other flavor is an IRA.  You can contribute $5,500 per year to this for you and $5,500 for your spouse.  These are outside of your company and you make the deposits yourself.  You choose your own provider, so competition has driven prices way down.  You can have both a 401(k) and an IRA and contribute the max to both (though at high incomes you lose the ability to deduct IRA contributions). These accounts are tax advantaged because you only pay taxes once.  With a regular brokerage account, you pay income tax in the year in which you earn money, then you pay tax every year on dividends and any capital gains that have been realized by selling.  There are two types of tax-advantaged accounts: Traditional IRA or Traditional 401(k).  You do not pay income tax on this money in the year you earn it, nor do you pay capital gains tax.  Instead you pay tax only in the year in which you take the money out (in retirement). Roth IRA or Roth 401(k).  You do pay income tax on money on this money in the year in which you earn it.  But then you don't pay tax on any gains or withdrawals ever again. When you leave your job (and sometimes at other times) you can move your money out of a 401(k) into your IRA, where you can do a better job managing it.  You can also move money from your IRA into a 401(k) if your 401(k) provider will allow you to. Whether traditional or Roth is better depends on your tax rate now and your tax rate at retirement.  However, if you choose to move money from a traditional account into a Roth account, you must pay tax on it in that year as if it was income because traditional and Roth accounts are taxed at different times.  For that reason, if you are just trying to move money out of your 401(k) to save on fees, the logical place to put it is in a traditional IRA. Moving money from a traditional to a Roth may make sense, for example, if your tax rate is temporarily low this year, but that would be a separate decision from the one you are looking at. You can always roll your traditional IRA into a Roth later if that does become the case.  Otherwise, there's no reason to think your traditional 401(k) should be rolled into a Roth IRA according to what you have described."