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URL:  http://boards.fool.com/gtremember-10-of-her-pretax-salary-3k-is-19454330.aspx

Subject:  Re: no matching 401k vs. Roth IRA Date:  8/13/2003  6:48 PM
Author:  rosietomato Number:  36907 of 75636

>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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