Here are some places to put your extra savings
— -- Q: I'm already maxing out contributions to my company's 401(k) and my Roth IRA. I can save another $100 a month, but where should I put it?
A: You have a good problem. Being able to save more than fits into your retirement accounts means you're doing a good job controlling your costs.
And there are plenty of options for that additional savings. My first suggestion would be to consider funding a traditional IRA if you haven't already. Anyone under age 70 1/2 can contribute as long as they have earned income. You may even be able to deduct part of your contributions from your income if you or your spouse meet certain criteria. Read the IRS rules.
But even if you can't deduct your contributions to a traditional IRA, it can provide a benefit. So-called non-deductible IRAs let you defer taxes until you take the money out, allowing money to compound tax deferred.
Just remember: When you take your gains out, they'll be taxed at your ordinary income tax rate, not the lower long-term capital gains rate. That's why income-producing investments such as bonds make more sense than stocks for a traditional IRA.
And don't forget about a regular, taxable brokerage account. You can open accounts with online brokers and pay low fees to buy mutual funds, exchange-traded funds (ETFs), stocks and bonds. And in a taxable account, when you sell a winning stock you have owned for a year or more, you pay the lower long-term capital gains tax, which offers a bit of a break.
Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Click here to see previous Ask Matt columns.
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