Comments on: 401(k) or Roth IRA? http://advancedpersonalfinance.com/401k-or-roth-ira/ Moving beyond the basics Mon, 01 Dec 2008 23:21:48 +0000 http://wordpress.org/?v=2.2.2 By: Susan Parker http://advancedpersonalfinance.com/401k-or-roth-ira/#comment-20542 Susan Parker Thu, 13 Mar 2008 17:40:36 +0000 http://advancedpersonalfinance.com/401k-or-roth-ira/#comment-20542 I switched to a self directed IRA and am investing in real estate the investment options are excellent. I switched to a self directed IRA and am investing in real estate the investment options are excellent.

]]> By: Khyron http://advancedpersonalfinance.com/401k-or-roth-ira/#comment-5933 Khyron Sun, 11 Nov 2007 13:32:20 +0000 http://advancedpersonalfinance.com/401k-or-roth-ira/#comment-5933 Hmmm. Self-directed Roth IRA? Self-directed regular IRA even. Self-employed 401(k)? I don't think there's a either/or comparison to be made. If you can do both, do it. The regular advice seems to be max the 401(k) until you get the full match, then max the (Roth) IRA then top off the 401(k). I personally say max the 401(k) first to reduce AGI. That alone saves me every year. Probably not helpful if you're making 115K but under that, I think its an automatic win. Hmmm.

Self-directed Roth IRA? Self-directed regular IRA even. Self-employed 401(k)?

I don’t think there’s a either/or comparison to be made. If you can do both, do it. The regular advice seems to be max the 401(k) until you get the full match, then max the (Roth) IRA then top off the 401(k).

I personally say max the 401(k) first to reduce AGI. That alone saves me every year. Probably not helpful if you’re making 115K but under that, I think its an automatic win.

]]> By: Tim http://advancedpersonalfinance.com/401k-or-roth-ira/#comment-4993 Tim Thu, 01 Nov 2007 18:55:48 +0000 http://advancedpersonalfinance.com/401k-or-roth-ira/#comment-4993 the other point omitted is the higher contribution limits of 401K versus IRA. the other point omitted is the higher contribution limits of 401K versus IRA.

]]> By: Smart Investing & Money Management http://advancedpersonalfinance.com/401k-or-roth-ira/#comment-4981 Smart Investing & Money Management Thu, 01 Nov 2007 14:23:27 +0000 http://advancedpersonalfinance.com/401k-or-roth-ira/#comment-4981 Roth 401(K) has some other advantages over tranditional 401(K) Roth 401(K) offers tax free earnings which will be better choice if you (1) expect substantial earnings (2) have a higher tax bracket when you retire. A Roth 401(K) can be rolled to a Roth IRA which does not require mandatory distributoins at 70.5yrs. Roth 401(K) has some other advantages over tranditional 401(K)

Roth 401(K) offers tax free earnings which will be better choice if you (1) expect substantial earnings (2) have a higher tax bracket when you retire.

A Roth 401(K) can be rolled to a Roth IRA which does not require mandatory distributoins at 70.5yrs.

]]> By: KMC http://advancedpersonalfinance.com/401k-or-roth-ira/#comment-4968 KMC Thu, 01 Nov 2007 12:25:49 +0000 http://advancedpersonalfinance.com/401k-or-roth-ira/#comment-4968 EJD - I see what you mean about the 'choices' bit. What I was trying to convey was that research has repeatedly shown too much choice is bad. So in a 401(k) plan with many, many choices, people who aren't experienced with investing typically do one of two things. They either spread their contributions evenly among the choices or put all of it in company stock or a cash equivalent. Neither one of those is a good choice. With a Roth, you avoid a lot of the potential negatives of a bad 401(k) plan. Namely, you can choose a low-cost version of just about any fund type you want. With a 401(k), you're stuck with whatever the company offers. But I do see your point. I wrote a post about what to do if your 401(k) sucks (it's below in the 'Related posts' section). In it, I say it's almost never advisable to pass on a company match, even if there is nothing else good about your plan. So I think you're right there. EJD - I see what you mean about the ‘choices’ bit. What I was trying to convey was that research has repeatedly shown too much choice is bad. So in a 401(k) plan with many, many choices, people who aren’t experienced with investing typically do one of two things. They either spread their contributions evenly among the choices or put all of it in company stock or a cash equivalent. Neither one of those is a good choice.

With a Roth, you avoid a lot of the potential negatives of a bad 401(k) plan. Namely, you can choose a low-cost version of just about any fund type you want. With a 401(k), you’re stuck with whatever the company offers. But I do see your point.

I wrote a post about what to do if your 401(k) sucks (it’s below in the ‘Related posts’ section). In it, I say it’s almost never advisable to pass on a company match, even if there is nothing else good about your plan. So I think you’re right there.

]]> By: EJD http://advancedpersonalfinance.com/401k-or-roth-ira/#comment-4886 EJD Wed, 31 Oct 2007 22:52:31 +0000 http://advancedpersonalfinance.com/401k-or-roth-ira/#comment-4886 Nice assessment of key things to think about when choosing to fund a 401k and/or Roth. In the Investment Options section you cite too many choices as being a detriment of some 401k plans, while at the same time you say that being able to invest in almost anything with a Roth is a positive. While I personally lean toward the "more choices the better" side, it does require significantly more vigilance and research to maintain a solid portfolio. I'd say that the advantage here really depends on the breadth and quality of funds offered in a particular 401k. As for the Matching Contributions, unless the fund choices are truly horrible, or the matching percentage is obscenely low, I personally cannot see any circumstance where foregoing the "free money" from a matching contribution makes any sense. Certainly, in most cases there is a decision to be made once the full matching contribution is covered, do you contribute more to the 401k or divert excess investment funds to a Roth. I'd be interested to know of other considerations that make a Roth more attractive than a 401k with matching contributions? Nice assessment of key things to think about when choosing to fund a 401k and/or Roth.

In the Investment Options section you cite too many choices as being a detriment of some 401k plans, while at the same time you say that being able to invest in almost anything with a Roth is a positive. While I personally lean toward the “more choices the better” side, it does require significantly more vigilance and research to maintain a solid portfolio. I’d say that the advantage here really depends on the breadth and quality of funds offered in a particular 401k.

As for the Matching Contributions, unless the fund choices are truly horrible, or the matching percentage is obscenely low, I personally cannot see any circumstance where foregoing the “free money” from a matching contribution makes any sense. Certainly, in most cases there is a decision to be made once the full matching contribution is covered, do you contribute more to the 401k or divert excess investment funds to a Roth. I’d be interested to know of other considerations that make a Roth more attractive than a 401k with matching contributions?

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