What to do first, max out 401ks or open an IRA?

[Vic99]

I'm 45, make 72k/yr, have a 403b and contribute about $5,500/yr plus I take full advantage of the company match.
Wife is 40, makes 102k/yr, has a 401k and contributes about $9,500 also taking full match.

We each have ~150k in our accounts.

House will be paid off in 3 yrs (only 2.5% interest rate), no credit card debt.  One car loan at 0% paid off in 2.5 yrs.  No other loans.  We have a 3 & 5 year old boys.  No plans for other kids. Already started saving for college for them, but that is another thread topic.

Currently have no IRAs.  Been revaluating our money over the last month to retire early, in 10 years maybe.  I've been pretty good with spending, but can do much better.  Rethinking and overhauling a lot.  Last night I actually saved 40% on car insurance by switching to Geico.  Unbelievable.

1) For future earning above what we are already contributing to 401/403s, should we max out these accounts at 18k each or open an IRA and put the money there?

2) We have about 10k extra in a money market that we want to invest.  Since it has already been taxed from payroll whenever we earned it, does it make sense to put it into an IRA where it can grow tax free?

3) If we were to open an IRA now or in the future, do you think that Fidelity or Vanguard are better in terms of fees . . . or is that question too complicated to answer?

Many thanks.

[rpr]

1. Max out your 401k's first unless the options are really, really, bad with high expense ratios.

2. If you are going to have cash flow issues in maxing out your 401ks/403bs over the rest of the year, use this money for expenses. If no cash flow issues, then definitely contribute to two Roth IRAs.

3. Both Vanguard and Fidelity have very low expense ratio funds.

[forummm]

1) If the fees are good in the 401/403, you can put it there. If not, put it in the IRA. You should ideally max out both your work retirement accounts and IRAs too :)

2) Yes.

3) I prefer Vanguard. Pretty much all their funds are good (low-cost broadly diversified index funds. Fidelity is OK, but only a handful of their funds are low-cost.

[MDM]

1) For future earning above what we are already contributing to 401/403s, should we max out these accounts at 18k each or open an IRA and put the money there?

You make too much to deduct contributions to a traditional IRA, so take advantage of the 401k/403b.  You save 25% on federal taxes now (plus whatever on state).  If your marginal rate on withdrawal is less than 25% (plus whatever on state) you come out ahead.  It gets better: you'll save ~30% on the last few thousand dollars you contribute to the 401k/403b because you'll be eligible for the Child Tax Credit (taking the numbers in the OP at face value).  See a spreadsheet or a web site for more tax "what if?"s related to this question.

[Vic99]

You guys are great.