I’m 23 years old and am working on ‘paying myself first’ and saving for my future. My company offers a 401k program that I’m currently investing 4% pre-tax into. In April my company will begin contributing an additional 6% as long as I maintain my 4% investment. Is this worth it though or should I be investing in a ROTH IRA. For the past two years (and anticipating this year as well) I have had a 0 tax obligation. Is my money better served in a post-tax account? Should I have both? Right now my contribution is only about $40 every two weeks.
Loretta
{ 5 comments… read them below or add one }
Ronald
ROTH if you are under 35
If you were 35 to 40 years old it would be an iffy decision.
after 45 the only choice you really have is 401K.
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Marvin
Do both… keep your 401K set-up conservative for now.
But you can’t get “free” money from your employer unless you set up the 401K and you can not get a tax credit for a 401K unless you have one.
The Roth can be yours and you can set it up with your bank.
Since the Roth is funded with after tax money this money is always yours to keep.
When in doubt… do both… either way you are saving for your future and retirement.
June
Invest enough in the 401k to get the company match. That is an automatic 100% return on that money! Then if you have extra put money into a Roth IRA. That way you will have tax diversification as well.
Annie
Contribute to the 401(k) up to the company match. Then max out a Roth. If the total is not 15% of your income, go back to the 401(k).
Dan
Both. Contribute enough to the 401(k) to get the maximum company match. Next, “max out” a Roth IRA. If you can still contribute more, put more into the 401(k). But DON’T make the common mistake of trying to save for short-term goals (a car, a house, etc.) within retirement accounts - they are not designed for that.
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