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Subject:  Re: no matching 401k vs. Roth IRA Date:  8/13/2003  6:48 PM
Author:  rosietomato Number:  36907 of 87994

>Remember, 10% of her pretax salary ($3k) is the roughly the same as 12.5% after tax (assuming a 25% tax rate), or $3750. This means that it costs $750 more to put $3k into a Roth than it does to put it into a 401k. If the fund selection in the 401k is OK, then don't just dismiss it.
Ah,but aren't you looking at the wrong end? She's only 23. At age 65 what does the taxed vs untaxed retirement savings net if later on, at a higher salary, her company begins to match in the 401K? I tried playing around with the fool calulators but I wasn't sure I was doing it correctly because the Roth vs. 401K assumes all or nothing.

My gut suggests she's better with a Roth that she could continue for 30 years to net $400K tax free at that point. Now if she had that in a 401K that increased well above the $3K a year and had matching later in her career, she'd probabaly have a million in her 401K which would kick her into a high tax bracket while she'd still have $400K of her Roth tax free. Not sure my assumptions are correct, am willing to hear discussion.
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