If you're maxing out your 401(k) -- getting every penny of the available employer match -- you might want to consider opening an individual retirement account. Or better yet, if you don't make too much money, save in a Roth 401(k), says Doug Zarookian, manager of Charles Schwab's Park Avenue office in New York.
While the money you set aside in an IRA after you've maxed out your 401(k) won't be pretax dollars and you never can save pretax dollars in a Roth, the money in either one will grow tax-free. With a regular IRA, you'll pay taxes when you take the money out; with a Roth, you won't pay taxes at all -- and neither will your heirs if you decide to leave the account to them.
You'll qualify for a Roth if your adjusted gross income -- the bottom line on the first page of your tax return -- is $110,000 or less if you're single, or $173,000 or less if you're married and filing jointly.
IRAs can be very flexible in terms of what you choose to save. You can put away real estate, some types of precious metals, royalty interests in oil and gas wells, timberland and other nontraditional investments. But Zarookian says that's not what most people do. "We mostly have people in individual stocks and bonds and mutual funds. Exchange-traded funds, ETFs, are getting a lot more use," he says.
One reason why ETFs are popular is their low cost -- in some cases as low as 10 basis points -- while actively managed mutual funds and equities can be as high as 1.5 percent. "An investment manager has to do a lot of work to justify that," Zarookian says.