Should I max out my 401k or contribute to a Roth IRA?

Answer 1

Not sure what you mean by 'max out' your 401(k). You should contribute enough to your 401(k) to get the maximum Company contribution. Additional unmatched contributions may not be really worthwhile. Then you should fully fund your Roth IRA. The proceeds are TAX FREE!!

If you're lucky, one day you will make so much money that you will be ineligible for a Roth IRA. Wouldn't that be nice? But in the meantime, get that Roth funded!

You might also ask your company about the new Roth 401(k).

Answer 2

Max out your 401k first because it's probably matched by your company- and that way it is also pre-tax dollars (which lowers your income for the year- meaning less taxes to pay at the end of the year. Once you max your 401k, consider contributing to a Roth bec. those dollars are after tax and when you retire, you can have some tax free income stream. You need tax free dollars when you retire so you don't pay too much taxes on deferred plans later on...such as your 401k or a Traditional IRA. (This is all assuming you qualify - based on your income level- to contribute to the Roth IRA)

Answer 3

I'm going to echo Suze Orman and say contribute to the 401k enough to get employer matching, then contribute to a Roth IRA.

(To not participate in a matching program is giving away free money.)

I personally think taxes will be at European-like levels when I retire (free healthcare isn't free), so I would rather pay the tax now and get the Roth earnings tax-free in the future.

For the record, I do both (max 401k and max Roth IRA).

Answer 4

Roth IRA, the reason is that a Roth IRA would give you 10 times the return vs traditional IRA such as; 401k, 403B etc. if you're looking in long term investment, Roth IRA would be it. believed it

Answer 5

how much does your employer contribute to your 401k?

i wouldn't suggest putting all of your eggs in one basket, but do a couple of financial models that show you the payout.