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Thank you everyone for continuing to send me great questions to answer each week! This question comes from Suzanne, who is in an awesome financial situation! I hope to be in her shoes very soon, and it’s something that I think everyone should aspire to be in!

The Question

Robert, I was hoping that you could help me figure out what to do next. I’ve been taking full advantage of my employer 401k at work, and I’ve also maxed out my Roth IRA this year. I’m expecting to get a bonus next month in December, and want to continue to invest it, but I’m not quite sure where the best place to put my money is now… What should I do with my investments now?

The Answer

First off, awesome job Suzanne on maxing out your IRA while still taking advantage of your 401k at work. That is a great achievement. When it comes to what to do next, you have three basic options, which you can do individually or combine as well.

Option 1 – Max Your 401k Past the Match

The first option that you may want to consider is putting more into your 401k, regardless of whether your employer matches your contribution. In your email, you weren’t clear if you were just contributing to get the employer match, or if you were contributing and were going to hit the current year limit of $17,000.

If you’re just contributing to get the max, AND you are happy with the investment choices that your company offers and fees they charge, consider contributing more to your 401k to get closer to the max. A 401k is a great way to save, even if you don’t get a match, because your contributions are tax deferred and your account will grow tax deferred until your withdraw the funds in retirement.

Option 2 – Open a Non-Deductible IRA

The next option is to open a Non-Deductible Individual Retirement Account (IRA). The non-deductible IRA, just like a Roth IRA, allows you to contribute up to $5,000 per year. The account is similar to a Traditional IRA in that your growth and gains aren’t taxed until retirement. The difference between a Non-Deductible IRA and Traditional IRA is the tax deduction you take on your taxes – you just can’t do it with a non-deductible IRA.

The benefit of using a non-deductible IRA is that you still get the tax benefits of your investments growing a tax-deferred vehicle. Depending on the investments you select, this could be very helpful.

Option 3 – Open a Standard Brokerage Account

Finally, you have the option of investing in a standard brokerage or investment account. These accounts are fully taxable, and there is no limit to the amount you can invest, or the types of investments you can hold in these accounts. The biggest concern is that you will pay taxes on all gains and income derived from these investments each year. This means it is very important that you select tax-efficient investments for standard brokerage accounts.

Which option do you think Suzanne should take?