My company allocates stock as tax-deferred retirement funds. The company also has a 401(k) plan to which I contribute. Unfortunately, the 401(k) contributions are typicallly refunded in full at the end of the year, apparently because the maximum limit of tax-deferred contributions has been reached (401k + ESOP stock). My question is, which of the following decisions makes the most sense? (1) making tax-deferred contributions to my 401(k) each year, then taking the refund (contributions and earnings) and putting it into an IRA; (2) Avoiding the 401(k) and instead contributing taxed dollars into an IRA? Is there any way to defer the taxes on the 401(k) refund??? Is my company doing more harm than good? Frankly, working for a major airline, I'd rather have matching 401(k) dollars than stock any day, but sadly that is not an option. Please advise. Thanks.
Foolsrule,I think you might do well to try your question on the Tax Strategies board, or maybe the Retirement Investing board. From what little I can tell though, I think you would do best to contribute after-tax dollars to a Roth IRA first (the limit as you probably know is $2000 a year) and only after you've done that, make contributions to the 401k with the hopes that that money will stick.As I say, try the Tax Strategies board for an additional line of attack on this question.Bill
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