If you have the financial wherewithall to have the option to fund both a 401(k) and an IRA you are taking serious strides in the right direction.  The question often arises, though.  WIth all the rules surrounding retirement accounts in addtion to the sheer volume of different plans out there, can I participate in more than one at a time?  Off the top of my head we have several retirment vehicles available to the general populace including 401(k), 403(b), standard IRA, Roth IRA, Roth 401(k), SEP IRA, and Simple IRA.  That is a lot of different vehicles to be worried about! 

Let's start with this question, being are we able to contribute to both.  The quick answer is yes, everyone is fully able to contribute to both a 401(k) and an IRA.  Of course there are maximums in place for these vehicles which must be adhered to.  So the 2009 401(k) limit is $16,500 and the maximum contribution limit for IRA's is $5,000.  So you may contribute to both a 401(k) and a traditional IRA in the same year. 

Here is where the rubber hits the road. We know that we can contribute to both vehicles, the question becomes should  we contribute to both.  This is where it becomes important to understand that there are certain income limits that make contributing to both not in your best economic interest.  The 401k is always tax deductible.  That should be a staple of your retirement windfall (especially since most employers give matching contributions).  The tricky part becomes the whether the IRA portion is tax deductible if you are contributing to a 401k.  This is all dependent on your modified adjusted gross income (MAGI).  It also changes depending on your finling status.  If single and MAGI over $53,000 then the IRA is not deductible.  After $53,000 the amount deducted is reduced until it is 0 at $63,000.  If married filing jointly and you contribute to a 401k then that limit is increased to $85,000 which is then decreased up until it will be 0 at $105,000. 

To make it even more convoluted, if you are married filing jointly and you don't contribute to a 401k, but your spouse does then the MAGI of the couple goes up to $159,000 and phases out at $169,000.

If you meet the Roth IRA eligibility requirements then this is likely your best bet when combining with a 401k. There are income limits here and the money doesn't give you any pre-tax benefits, but once the money is in there all the earnings are tax free if you don't touch them until you are 59.5 years old. Sound advice is to max out your matching contributions to your employer plan (often times companies match a portion of your contribution up to 6% or similar). Make sure to take full advantage of that and then focus remaining finances on a Roth IRA for both you and your spouse (if you have one) until those are maxed out (again assuming that you fall under the ability to qualify for the Roth IRA).