No. of Recommendations: 6
gibbsaar...

I am 26 years old and currently contribute 6% of my salary before taxes to my 401k. I want to start to contribute more towards retirement. I am considering the following options:

1. Up my 401k contribution to 10%
2. Start a Roth IRA - $3,000/yr
3. Start a Roth IRA for $3,000/yr and up my 401k such that I am saving a total of 10% of my salary.

Increasing my 401k percentage will reduce the amount of taxes I pay now, however, I will have to pay taxes on the growth at the end. A Roth IRA will provide me tax-free growth. Would appreciate any comments.


A fairly standard approach would be:

1)Contribute to your 401k up to the point where matching maxes out; next 2)Contribute $3,000 to a Roth IRA; then 3)Contribute again to 401k up to your goal of 10% of your salary.

Bill
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