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Subject:  Re: 401k vs. roth ira Date:  12/17/1999  11:10 AM
Author:  TMFPixy Number:  956 of 20599

Greetings, Chinapapa, and welcome. You asked:

<<My wife and I have a 403b (12% employer contrib. + 8% employee) and a 401k (15% employee + 3% employer) respectively. I would like to determine if we should cut back on these contributions and contribute to Roth IRAs in order to create a component of our retirement income that will be tax-free at withdrawal. ??given the same return over time on the same proportional investment-2000.00 pre-tax vs. after-tax, which would yield the better return at the end?? Someone must have asked this question in some form.>>

Yes, it's been asked and answered many times. The bottom line is you must do a tax-equivalent analysis of what's available to you within the 403b plan against that in any alternative outside that plan. Definitely stay in the plan to get all employer contributions possible. That's an immediate return on your dollars that in Fooldom we call Free Money. Fools rarely turn that down. Beyond that contribution level you need to run the numbers. In Step Four of my 13 Steps to Foolish Retirement Planning I provide one approach to doing that kind of analysis. Read that at and then run some numbers yourself. You are the only one that can do so.

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