any 401k experts here?
 

I was reading some shit that everyone seemed to agree that anyone in their 20's, probably 30's to (for sake of argument I'm in my 20's) should definitely put the max I'm allowed in a roth ira and if I want to save more (it said a roth ira was capped around $4k/year) to throw it in a traditional 401k. Do you guys concur?

Also, what % of your income would you save?

max it out.

roth is great...but don't forget in a 401k you are using pre-tax dollars, which then become tax deferred....
Whereas in a Roth you are funding it with money you already paid taxes on.

But yea...do both....max them out. or if you really need to pick the right mix.....fund the 401k up to your company match....then fund Roth with what's left over...

Bo

Umm, if you arent going to dig in until you really retire is 401k better? pre-tax just sounds better.

Depends on your situation.....cool thing about 401k is that you are not taxed on it NOW. So if you are putting lets say $500 bucks away each paycheck you are not taxed on that $500.........however, you are once you withdraw it. But great way to stash away money automaticlly. I started mine 12 years ago with 9% deposits and its six figures now.

Roth on the other hand is cool becasue the money is NEVER taxed. Since you already paid taxes on it.......

Keep in mind that there are income limits to the ROTH....I can't fund one anymore...but wish I could.......sweet deal...fund it while you can.

B

Thanks xporn!

Not a lot of long term planners up in here huh? Anyone else have an opinion?

If you are eligible for a 401K, you should do it. You have to be working for a company or you can start one for your company.

The max on a 401k is 15,500 this year. So you can put away 15,500 of your taxable income into it in 2008. Why do you want to do this now, it's because it might help you lower the amount of money you are paying out to the government. Say you are in the 28% tax bracket. That's $4,340 that you would be keeping instead of giving it to uncle sam to fund the war.

If you earn over 150K, i'm not sure on the amount, then you can only fund the 401K and aren't eligible to fund either a Roth or IRA. You can set one up one for your wife, but I forgot again at what limit.

If you own your own company, even though it will cost you some cash to setup a 401K or employer contributed IRA, it is worth it in the long run. You really need to talk to a tax advicer about this idea.

Why shouldn't you put money in a 401k or an IRA? Because you will be taxed more when you retire. Very few us on GFY are going to earn less when we retire, if anything we will be makeing even more, even if it's residual income.

The benifit of the Roth, is that the money won't be taxed when you retire.

Because You can't see into the future I say found whatever you are eligible to fund now.

If you are in your 20's now is the best time to fund one of these plans, even if you stop when you get older. If you fund an IRA from your 20th birthday to when you are 30 years old, you will easily have 700K by the time you retire.

If you have a son/daughter and you want to leave them 1 million dollars, simply fund an IRA or Roth in their name from age 15 to 18 with 3k a year. Just fund it for every year while they are in high school. When they reach retirement you will have left them 1 million.

Oh one point. 1 million will be worth allot less when we retire. When I retire 1 Million will be less then 400k in today's money. :(

Thanks for the response. I had not considered a lot of people will be in a lower tax bracket when they retire. I think you are correct, I probably will not be. The reason I wasn't sure if a Roth would be better than a 401k is because the 401k gets to make money with the money that would have been in the Roth plus the money that you would have had to pay in taxes for the Roth. Seems like deferring taxes 40 years while you make more money with the money that would have been taken in taxes would be better. Of course I don't know shit about such things, thats why I posted here.

I would recommended doing both Roth and 401K:2 cents: