Author Topic: A chunk in Employer 401k NOW or in my own Roth IRA 2 years from now?  (Read 219 times)

heybro

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I am able to put a chunk above the match in to my Employer's 401K NOW.
Or, I can put it in my Roth IRA TWO and THREE YEARS from now.
(I can't do it before then since I'll already be funding the max to my Roth IRA for the next two years).

Since, it could very well sit in my employer's 401k for the next 30....maybe even 60 years....... I just want to see what your ideas are in terms of which may be better.

Putting it in my Employer 401k Now:

Pro:
The magic of compounding gets to take place for two extra years.

Con:
Not my ideal fund choice. 
Higher expense ratio (.04 higher).  [This can easily negate the 2 extra years of compounding especially once the chunk gets huge decades from now].
Funds can change at any time without my input.
Expense Ratios can change at any time without my input.
You can not take the principal out like you can in a Roth.

I want to put it in a Roth a few years from now where I can have total control over it.
However, I also want to put it in something RIGHT NOW so it has the extra 2 years to grow!

Dilemma!
« Last Edit: July 12, 2019, 12:19:54 AM by heybro »

reeshau

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Re: A chunk in Employer 401k NOW or in my own Roth IRA 2 years from now?
« Reply #1 on: July 12, 2019, 02:51:45 AM »
So, I assume your employer doesn't have a Roth option?

Higher expense ratio (.04 higher).  [This can easily negate the 2 extra years of compounding especially once the chunk gets huge decades from now].

After 30 years, a .04% difference in expenses on a $6,000 initial deposit, assuming 8% nominal gains, is $667.25.  Not earth-shattering.  Meanwhile, two years of compounding (year 28 vs. year 30) is $8,613.30.  Go for the compounding, particularly if you are thinking of the long-term.  And, in my opinion, rethink the "benefit" of the ability to withdraw, for the same reason.

Now, if you meant a *4%* difference in expenses, that's crazy!
« Last Edit: July 12, 2019, 02:56:46 AM by reeshau »

MrsWolfeRN

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Re: A chunk in Employer 401k NOW or in my own Roth IRA 2 years from now?
« Reply #2 on: July 12, 2019, 07:46:14 AM »
When you leave the employer you can rollover the 401k to a traditional IRA with whichever brokerage you want, and choose the funds you want. So you only have to pay the higher ER for 2 years. There are also ways to get the money out early without paying penalties (Roth conversion ladder or SEPP).