Maxed out your 401(k)? How to save more

  @Money July 8, 2013: 4:31 PM ET
How 401(k) fees eat away at your savings
NEW YORK (Money Magazine)

My 401(k) contribution has been capped at 6%. How do I save more for retirement? -- Frankie L., Arlington, Va.

As you've found, the IRS limits 401(k) contributions by high earners -- chiefly those who earned more than $115,000 in 2012 -- unless their company ensures that lower-paid workers are also saving for retirement.

Start by putting $5,500 ($6,500 if you're at least 50 by year-end) into a Roth IRA, which offers tax-free withdrawals in retirement, says Moline, III., financial planner Marty Kurtz.

In 2013 your allowed contribution falls to zero if your income tops $188,000 ($127,000 if you're single), but anyone under 70½ with earnings can fund a nondeductible IRA and then convert it to a Roth. But you may owe taxes on this back-door deposit if you have other traditional IRAs.

Related: 401(k) vs. Roth 401(k): Which one's right for you?

Then buy low-fee, tax-efficient funds in a taxable account, says Kurtz. Index funds work well; their infrequent trading minimizes taxable gains. To top of page

Got a question for Ask the Expert? Send it to

What you'll have in retirement
If you've maxed out your 401(k) contribution, a Roth IRA is your best alternative, while tax-efficient funds in a taxable account are a good supplement.
Initial amount Value, net of taxes, of contribution invested for 30 years
401(k) $5,000 (pretax) $28,500
Roth IRA $3,750 (after tax) $28,500
Taxable account $3,750 (after tax) $22,400
Note: Assumes investment in stock index fund returning 7% annually; tax bracket of 25% at time of contribution and retirement. Source: Vanguard
Join the Conversation
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.32%4.26%
15 yr fixed3.36%3.27%
5/1 ARM3.37%3.27%
30 yr refi4.31%4.24%
15 yr refi3.34%3.25%
View rates in your area
Find personalized rates:
Rate data provided
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.