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Learning, Sharing, and Teaching => Investor Alley => Topic started by: justjenn on March 02, 2015, 12:55:10 PM

Title: 401k or Roth IRA
Post by: justjenn on March 02, 2015, 12:55:10 PM

I'm 25 and just starting to save for retirement. My employer offers a lump sum contribution to the 401k at the end of the year, regardless of how much I put in. I was just wondering if I should continue to contribute to my 401k or to use that to fund my Roth IRA

thanks!

Title: Re: 401k or Roth IRA
Post by: Revelry on March 02, 2015, 01:25:11 PM

Congratulations!  You're ahead of the curve by saving already.

How much are you able to save?  You can contribute $18k of your own pre-tax money to the 401k, so unless your company chose crappy high-fee funds that's superior to the $5.5k you can put into an IRA.  Even better would be to max out both.
What are your reasons for using a Roth instead of traditional IRA?  It's been described well at MadFientist and GoCurryCracker, but you will reach FI faster with traditional.  There are good reasons for using a Roth though.

Good luck on your journey!

Title: Re: 401k or Roth IRA
Post by: 27y/oTennesseeRetiree on March 02, 2015, 02:15:46 PM

I max out both. You can do it!

Title: Re: 401k or Roth IRA
Post by: GlassStash on March 02, 2015, 07:56:19 PM

If you can't do both, 401k is probably the way to go. You will have not only saved on federal income tax, but state and local income tax too.

Title: Re: 401k or Roth IRA
Post by: justjenn on March 03, 2015, 12:18:16 PM

thanks everyone!

Revelry - I chose the Roth because it's easier to take money out of it. Not that I'm planning to, but I just like the idea of knowing that I can access it if I really need to. The field I'm in relies on federal grants, so there's not a lot of job security. I have an emergency fund, but I feel better with a second safety net so to speak.