We promised to show you how to fund both 401k and a Roth IRA at the same time. This way you get the tax deduction now (and tax free growth in your 401K) and a Roth IRA contribution - tax free growth and tax free distributions from the Roth IRA when you retire.

Well... it's easier than you think. It merely requires that you earn enough money to be able to afford both 401k and an IRA contribution.

So here is the procedure:
First you fully fund your 401k - that's $ 15500.
Calculate your tax deduction - for most people, it's about $5000 (15500 * 30% (tax bracket))
Take the tax savings, and fund your Roth IRA.
Done!

This may seem like cheating - but do the math - funding 401k gives you enough of a tax deduction to fund Roth IRA with no "out of pocket" money - you are merely using the money you saved in taxes by funding your 401k.

Bonus strategy

Since most 401k plans are extremly expensive - can cost you as much as 2-3% per year in hidden fees, and the choice of investments is typically very limited, you may wish to have a better control of your money. In case you think this is not a big deal - the fees can add up to tens of thousands of dollars over the lifetime of your 401k. And the limited investment opportunities could cost you hundreds of thousands of dollars. so what can you do about it? When you leave your employer - rollover your 401k money into am IRA account.

Not everybody knows that when they leave their employer, they can take their 401k money and move them. After you leave current employer, you can request a direct rollover of your 401k into an IRA account. It's called a Rollover IRA. You go to an institution that you want to hold your IRA, and tell them you want to do a direct rollover of a 401k into an IRA. It is important to make it a "direct rollover" - you should never take posession of the money, or IRS could treat it as a distribution and slap the 10% tax penalty and regular income tax on the money. But if you make sure it's a direct rollover from your company's 401k plan to your IRA account - there is no risk of IRS problems.

Once you have the money in your IRA account - you can select any investment strategy you like, and any investment vehicle tha IRS allows - without the high fees you were previously paying to the 401k custodian.