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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76421  
Subject: Re: Roth v 401k Date: 2/24/1998 5:40 PM
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Greetings, drs, and welcome.

<<Does it make any sense to invest in a 401(k) plan at work that has no matching contribution if I already contribute $2000/year to a Roth IRA? I know the 401(k) allows me to save more money, but if I can only save $2000/year right now, should I put the money in the non-matching 401(k) or the Roth?>>

You have to look at your alternative rates of return. Fools believe we can beat the rates in most 401K plans by investing the money is securities we select ourselves. For that reason, in the absence of an employer match and given I would have but $2K to invest, I would go for the Roth where I can choose the securities for purchase. But you have to decide that for yourself.

There is one thing nice about a 401k, though, particularly for someone on a tight budget. The money goes in automatically via a payroll deduction. Invest outside the 401k, and you will have to exercise strict discipline to do the same, and sometimes that's tough to do. Other demands for limited resources will sorely tempt you to skip the savings "just this once." Do so, and you will be better off in the 401k regardless of how poor it is. The missed savings and compounding will never be made up.

Regards…..Pixy
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