Roth vs. 401K

January 4th, 2007  |  Published in 401K, Roth IRA

My Roth and 401K strategy is to contribute to your 401K until you get your company match, then contribute the maximum to your Roth IRA, then contribute the maximum to your 401K. How does this compare to Walter Updegrave, a Money Magazine senior editor, and his Roth and 401K strategy? It’s exactly the same as Updegrave’s strategy and you can reach it by skipping his explanation of the 401K and the Roth, as well as the benefits and drawbacks of both.

I think that it’s difficult to estimate whether you’ll be in a higher or lower tax bracket when you retire, in part because it’s hard to guess what your income will be and what the government will do with the tax brackets, and so putting all your eggs in one basket is going to be a mistake. That being said, with all that uncertainty, I think that the Roth IRA is crucial in any plan because it is offers you a sense of certainty – you are certain that you won’t be taxed on your funds in the Roth IRA. For those of you who think that the government might change it, remember that the government doesn’t change the rules of the game without grandfathering in the folks who started before they changed the rules.

Source: Money

  

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