Should i invest in 401(k) or Roth?

[Anonymous]

Anonymous wrote:

Anonymous wrote:How much do you have saved currently? If very little, I'd focus on maxing out the Roth IRA first then saving in the 401K.

This advise doesn't make sense to me. If the OP doesn't have much saved, and is limited in how much they can save, then the thing to do is save as much as possible, which means saving in a 401k. I have a Roth, but I save in it after I max out my 401k, not instead of it.

Well the OP probably makes too much for a Roth IRA, but I was suggesting this initially because at 55, there isn't much time to save. Might as well save post tax so at least the earnings/growth can be withdrawn during retirement without paying taxes on them. There isn't much time to build up a nest egg.

I would focus on paying off my mortgage asap.

[Anonymous]

Anonymous wrote:55, make $130/year and work for a company with no 401(k) match. Don't have enough money to fully fund both. So which would you do first and why?

Usually people are told to fund 401K to get the full employer match, then fully fund Roth, then go back and fully fund 401K. If you still have extra at the end of this you can start a regular savings plan (or college plan if you have children).

Since your employer does not match, I would fully fund Roth, then go to 401k. HOWEVER, if your company tends to give bonuses through the 401k, you have to be a participant- so then I would put int he minimum 401k first, then Roth, then rest of 401k.

Since you are over 50, your maxes for Roth and 401k are higher than younger people.

[Anonymous]

Anonymous wrote:

Anonymous wrote:55, make $130/year and work for a company with no 401(k) match. Don't have enough money to fully fund both. So which would you do first and why?

Usually people are told to fund 401K to get the full employer match, then fully fund Roth, then go back and fully fund 401K. If you still have extra at the end of this you can start a regular savings plan (or college plan if you have children).

Since your employer does not match, I would fully fund Roth, then go to 401k. HOWEVER, if your company tends to give bonuses through the 401k, you have to be a participant- so then I would put int he minimum 401k first, then Roth, then rest of 401k.

Since you are over 50, your maxes for Roth and 401k are higher than younger people.

I just don't think this is true (and especially not for older workers, and really especially not for someone who doesn't have a lot of retirement savings). For example, here is a random column I pulled up from Schwab. Now he kind of hides the ball on funding your 401(k) fully, because he won't get your assets that way, but he suggests that you should look at funding a traditional IRA before funding a Roth IRA. http://www.schwab.com/public/schwab/resource_center/expert_insight/retirement_strategies/planning/saving_for_retirement_ira_vs_401k.html

[Anonymous]

And here is another column (I just randomly pulled these from the first page of a google search) which says--

"A Roth 401k is good for people in low paying jobs now but expect to have high paying jobs later, such as current college students or recent grads. Or for the tiny minority of people who are already at the highest marginal tax level and expect to be there indefinitely. But the marginal tax rate concern, and your unique lifetime earned income (and ability to save) could mean you don’t see much in the way of a tax benefit in retirement.

Read more: http://www.mydollarplan.com/to-roth-401k-or-not-to-roth-401k/#ixzz2LXp18WRG