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Hi!

The downturn in the market has caused the company I work for to completely "suspend" matching our 401(k) contributions. I have a rollover IRA that I set up when I switched jobs, so I am thinking that I would be better off taking my current 401(k) contributions and putting them into this IRA. Does anyone have any thoughts on this? I think that my tax benefits/implications should be the same either way, right?

Thanks in advance!

RKCBWolf
Trying to be Foolish...
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....taking my current 401(k) contributions and putting them into this IRA. Does anyone have any thoughts on this?

You have to leave your job inorder to get your current contributions.

The Dreamer.
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taking my current 401(k) contributions and putting them into this IRA

Do you mean suspend current payments and contribute to an IRA Instead? It would be the same tax benefit only if your AGI limits were less than allowed for a tax deductible IRA. See publication 590 for the limits. Contributing to a 401K for any part of the year makes you part of a pension plan for the whole year and subject to those limts.

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I'm confused. Does the original poster mean past contributions, or future ones?

Thanks!
Joe
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Do you mean suspend current payments and contribute to an IRA Instead?

Yes, what I was meaning to say is that I want to take my current bi-weekly contribution and invest it in my IRA instead of my 401(k).

Also, this would only be until the matching contributions are reinstated

Thanks!

RKCBWolf
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I was meaning future contributions. Sorry for the confusion.
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I think that my tax benefits/implications should be the same either way, right?

The biggest difference is that you can only contribute $2k to an IRA this year. (Next year is $3k IIRC.) The max for a 401k is $11k. If you're putting more than $2k into the 401k, you won't be able to put as much as you were contributing into the IRA.

--Peter
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>>thinking that I would be better off taking my current 401(k) contributions and putting them into this IRA. Does anyone have any thoughts on this? I think that my tax benefits/implications should be the same either way, right?<<

Assuming you are a long way from retirement, then if you are eligible to contribute to a Roth IRA, best to open one and max that out before anything else.

And assuming your 401k funds don't royally suck (high expense ratios, loads, or underperforming), ideally, you want to max *both* your IRA (preferably Roth) *and* your 401k, regardless of whether the company matches. It may still be worth it even if your 401k funds do suck. For example, it may reduce your modified AGI enough to allow you to contribute/rollover to a Roth. Also, if you don't expect to work there too long, remember, you can rollover to an IRA when you change jobs -- even a Roth IRA if you are willing to pay taxes now on the balance (which is again generally worth it if you are a ways from retirement).

Also, the tax deduction for a traditional IRA phases out depending on your income, whereas your 401k contribution does not. Beyond that, the difference is you have more investment choices in the IRA than the 401k.
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