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Old 08-27-2018, 08:35 PM   #1 (permalink)
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Roth IRA vs 401k

So Iím digging around in old threads and trying to educate myself a bit more on my fledgling retirement stuff.

As it sits right now I put

$100 per month in a Roth IRA
$300 per month in a Money Market account (makes shit at .01% and is used more as a savings account that isnít touched)

I have been made aware of a 401k that is available to me but there is no contribution match.

Now that I have payed off all my dept (not counting my mortgage) I have some spare money at the end of the month.

Is starting up a 401k worth my time? Or should I just work on trying to max out my Roth every year now?
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Old 08-27-2018, 08:37 PM   #2 (permalink)
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Max out your Roth. Then start looking at other ways to save / invest.
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Old 08-27-2018, 08:47 PM   #3 (permalink)
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I have both. I couldnít decide. I still contribute to the roth, the 401k Is worth more because I put a lot of money away when I was working.
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Old 08-27-2018, 08:48 PM   #4 (permalink)
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Max out your Roth. Then start looking at other ways to save / invest.
So you can do without your whole life, just to die the day after you retire.


letís see what I catch
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Old 08-27-2018, 08:51 PM   #5 (permalink)
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If there was a 401K match, your priority should be 1) minimum requirements to get full match (aka free money), then 2) max out your Roth IRA ($5500), then 3) max out 401K ($18,500). And have your Roth and 401K in pretty aggressive (10-20% return a year) funds. My 2 cents (not worth much!)

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Old 08-27-2018, 09:05 PM   #6 (permalink)
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So you can do without your whole life, just to die the day after you retire.


letís see what I catch
With no debt 5500 per year should hardly be doing without.
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Old 08-27-2018, 09:06 PM   #7 (permalink)
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I have a Roth and a "regular" IRA. Tax-wise, a 401K is more like a regular IRA (I rolled my 401K into it), so you might look at opening one of those. The only reason I know of to have a 401K (besides employer match, if available) is that you can contribute a lot more to one than to an IRA. Without a match, and with $5500 or less to contribute each year, an IRA is fine.
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Old 08-27-2018, 09:40 PM   #8 (permalink)
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Definitely max out the ROTH, $5500 a year. I see no reason not to.

If you have matching 401k, absolutely do that. That's free money right there. I don't know that many places match decently, or at all anymore. At least not many in my industry do.

I went through a heavy saving money period a while back for many years, and was able put down a large amount on a house because of it.

You don't live forever, and you don't know when your number comes up. So don't forget to stop saving every now and then so that you can have some extra $ for your hobbies and to enjoy yourself. This is easier if you don't have a family/kids, but don't forget to think about the NOW! :-D Even when I'm spending more than normal, I still do basic savings. Always max out ROTH, and never put myself into debt except for a mortgage.
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Old 08-27-2018, 10:04 PM   #9 (permalink)
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If you need/want to reduce your taxable income, 401K offers an advantage. Also, since the money is pre-tax, you can effectively put more in the 401k and have the same take home pay than you can with a Roth. Both are good options.
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Old 08-27-2018, 10:06 PM   #10 (permalink)
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If you need/want to reduce your taxable income, 401K offers an advantage. Also, since the money is pre-tax, you can effectively put more in the 401k and have the same take home pay than you can with a Roth.
Same (more or less) tax situation with a "normal" IRA.
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Old 08-28-2018, 06:52 AM   #11 (permalink)
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Only thing people are missing here so far is that you can put ROTH money into a 401k as well.

It is up to your employer apparently how much of it can be ROTH vs traditional.

My employer allows all of my contributions to my 401k to be ROTH, all of their matching however is traditional pre tax money.

According to my financial advisor this is unusual (Allowing all of my money to be ROTH) but good for me.
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Old 08-28-2018, 07:48 AM   #12 (permalink)
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Check out All America bank for a money market account offering 2%. Still not a great ROI but better than .1%, good for an emergency fund but I wouldn't use it to "invest" with. https://allamerica.bank/personal/ban...arket-checking

Roth is post tax so you won't have to pay taxes on it when you withdraw, 401k is pre tax so you will pay taxes when you withdraw.

When do you plan on retiring? How much do you think you'll need yearly to live/ vs. how much do you make down? Play with an inflation calculator to get an idea how much you'll need to live on when you retire. Then play with a Roth IRA calculator to see how much you'll have avilable. If you plan on being in a lower tax bracket when you retire the 401k makes more sense, if you plan on being in a higher tax bracket the Roth makes sense. Either way you are gambling on what politicians will do with tax laws, I personally would rather pay the taxes now and not worry about it later.

In a perfect world you'd have enough in your investment accounts to live off the interest your accounts are earning.

Also look at real estate/ rentals for another piece of the puzzle. Depending on when you plan on retiring it's possible to put 20 grand down on a rental and in 15 years have it making you 15-25 grand a year while it's generated a profit of 30-45 grand in those 15 years to help with up keep/ reinvest into another or something else. In the mean time all you've done to it is talked with your property manager once in a while, your rental doesn't need to be anywhere near where you live. If you don't get a match on your 401k this might be a better option.

If you haven't played with an inflation calculator it's a real eye opener.
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Old 08-28-2018, 07:55 AM   #13 (permalink)
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Max out your Roth. Then start looking at other ways to save / invest.
For example, real estate.

I like that Roth has tax-deferred disbursements but keep wondering when those greedy muther fawkers in DC will figure out how to tax them.
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Old 08-28-2018, 08:17 AM   #14 (permalink)
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So Iím digging around in old threads and trying to educate myself a bit more on my fledgling retirement stuff.

As it sits right now I put

$100 per month in a Roth IRA
$300 per month in a Money Market account (makes shit at .01% and is used more as a savings account that isnít touched)

I have been made aware of a 401k that is available to me but there is no contribution match.

Now that I have payed off all my dept (not counting my mortgage) I have some spare money at the end of the month.

Is starting up a 401k worth my time? Or should I just work on trying to max out my Roth every year now?

Mix it up.

With 401k more money will be going in because its all pre tax.
With Roth less money goes in now because its post tax.
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Old 08-28-2018, 10:38 AM   #15 (permalink)
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instead of putting money into the money market, buy a mutual fund with that $300.
I buy lots of QQQ and have done real well with it. Vanguard has some real nice mutual funds too. you will see better returns than .01%
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Old 08-28-2018, 11:13 AM   #16 (permalink)
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get a different money market account last check vanguard was 1.7% .
better yet get an investment account and start investing , nothing fancy index funds, target date funds should be low risk and bring in more than 1.7%

max out the Roth
and contribute to the 401K as much as you can afford, it pre tax money so you pay less now and hopefully be in a lower bracket during withdraw if managed properly.

also if you can stay away from the money create an investment account so you don't need to wait til 60 years old to retire, if everyhitng is tied up in retirement accounts you will not have a chance to retire earlier than 60.

Last edited by ransil; 08-28-2018 at 11:17 AM.
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