If my job has a 401 that matches some of what I put in....and Vangaurd has a tax-free IRA for retirement, which one should I put money into? One taxes me but the other matches some of what I put in.
2006-06-30 04:37:33 · 5 answers · asked by Anonymous in Business & Finance ➔ Investing
I would favor the employer-matched 401K because it is free money and it reduces your current tax burden.Employer matching typically maxes out at some amount, so put in at least that much in order to get the most free money from them.Those extra funds will help your 401K grow faster throughout the life of the account.
2006-06-30 04:46:21 · answer #1 · answered by Fred 3 · 0⤊ 0⤋
At the very least, put enough into your 401k to earn all the matching funds. That's free money and you'd be foolish to walk away from it.
The Vanguard IRA - is that tax free upon retirement? If so, then it's called a Roth IRA.
I'd say you should base your decision to invest the balance based on your current tax rate. If that money will be taxed at 15% today because your income is not real high, then the Roth IRA makes sense. Pay low taxes today and have tax free money when you retire.
If on the other hand, that money would be taxed at 25% or higher, maybe it make more sense to invest the balance in your 401k also and save on those taxes today. Your income when you retire may be small enough that you will pay a lower tax rate when you take that money out.
As an added benefit to investing it all in your 401k, the money you didn't pay in taxes this year is also invested in the 401k, and will grow for you along with the other money, for X many years. Another benefit, is the amount you can save in your 401k is far higher than in an IRA, which is capped at $4,000 per year, or $5,000 if you are over 50.
2006-06-30 13:46:57 · answer #2 · answered by Uncle Pennybags 7 · 0⤊ 0⤋
Put in both, put in the max in the 401K where they will match you $ for $ and the IRA is a roth which is tax free as the $$$ you put in is taxed at inception (401K taxed when you take it out)
invest the 401K in Small Cap Agressive Growth for a while you will be happy (divesiffy by putting some of the 401 $ in small cap international vanguard fund).
2006-06-30 14:28:50 · answer #3 · answered by taghans 1 · 0⤊ 0⤋
1st- 401K, which is the IRA plus free money from the employer. make sure you diversify the 401K and don't put it all in your employer's stock. remember ENRON
2nd- IRA, Roth is the best one if you make less than 90K if single
For more info on this Google: Suze Orman
Good Luck!!
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2006-06-30 11:57:25 · answer #4 · answered by Ernie Sal 2 · 0⤊ 0⤋
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2006-06-30 11:47:27 · answer #5 · answered by Anonymous · 0⤊ 0⤋