You can contribute that amount to a traditional IRA or a Roth IRA, or you can spread your money across each type of plan. People who have a retirement plan at work should look at the IRA's income limits to see if they're eligible to deduct their contribution to a traditional IRA. Unlike Roth IRAs, traditional IRAs are funded with pre-tax money, so you can usually cancel your contribution during the year you make it. So, if you're wondering if you need to contribute more money to your 401 (k) or IRA now, it really depends on your individual finances.
These income limit rules won't affect most people, and the impact on the people they do affect is minimal and they shouldn't detract much from your retirement savings strategy. If you don't qualify for a traditional IRA tax deduction or if a Roth isn't right for you, the wisest thing to do is to stick with your 401 (k). It's important to distinguish that the limit is based on total compensation, which includes employer contributions to a 401 (k) plan and not just salary. This can make planning contributions extremely difficult, since the limit is based on contributions and compensation from other employees.
Married couples can also contribute the same amounts to a spousal IRA for a non-working spouse, as long as one spouse earns enough income to cover both contributions. The best practice is to contribute up to the standard contribution limit and let the plan administrator determine if you made an excessive contribution. It's just a matter of initially setting up a payroll deduction to contribute to your 401 (k) plan and choose investments, and then updating your preferences, perhaps once a year. Unlike traditional IRAs and 401 (k), Roth IRAs impose income limits that determine how much you can contribute.
You can contribute to a 401 (k) and a Roth IRA at the same time, as long as you meet the income requirements of a Roth IRA. Next, there's the general contribution limit, which combines employer and employee contributions. If you're single and don't have a work plan, or if you're married and neither you nor your spouse have one, you can deduct your entire IRA contribution regardless of your income. Remember that the sooner you contribute to your retirement accounts, the more time you have the compound interest to work its magic and help your money grow.