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Both my wife and I are currently contributing the maximum to our 401ks (17% and 15% respectively). She won't come close to maxing out, but I will, not going over this year because I have only been contributing the max for the past few months. I started taking an intense interest in our finances (about time!) a few months ago and it was one of my first actions (max out the 401ks for the tax break).

After reading a few threads, I am thinking I should be maxing out Roth IRAs to balance out my retirement fund (non-taxable earnings on ROTH vs. taxable 401k earnings). So, lower our 401k deductions to the point where we don't lose any company matches, and as best we can, max out our ROTH IRAs.


A couple of follow-up questions. Are either of you getting employer matches? If so, on what percent? Fools do not turn down free money, so if you reduce your 401K contribution, don't go below that which gets you the full match.

Second, can you find money anywhere else for your Roths? You will want to establish one each for you and DW. You can put in $3000 each this year (more if you are over 50 and want to play catchup). First look for ways to find the cash in your current after-tax disposable income. Only if there is no room would I cut back on your 401K.

A few more considerations. RIRAs are advantageous if your tax bracket now is less than what it will be in retirement. It is also useful if you may want to pull contributions out before retirement. TIRAs are advantageous if you be in a smaller tax bracket during retirement and you can really use the tax break now. RIRA = Contributions taxed now, earnings not. TIRA = Contributions and earnings tax deferred.

Finally, how are your 401Ks? If you have a poor menu of funds from which to select, it may be more advantageous to put money into a Roth where you have more control. On the other hand, unless you go with a discount broker like Scottrade, you will probably have account maintenance and transaction fees until your Roth grows to $10k or more.

Hope this helps and good luck!
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