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Author: rjm1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Re: 401K, Roth IRA, & Taxes Date: 9/3/1998 10:56 PM
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Hey, Fools. Last year, when I embarked on my career, I started socking
away 10% into my 401K immediately. (The first 4% of which is matched
with an additional 2%). Then I opened an IRA, and rolled it into a Roth
IRA conversion. (I'm young and saving for a house someday, so the Roth
IRA looks good.) This year I still put away 10% into the 401K, and I just
opened a new Roth.

Now, I'm thinking... tax-wise... wouldn't it have been better to MAX my
tax-deductible 401K contributions to the full 18% my employer allows (up
to $10K or so) before investing anywhere else?

Insight...? --AliFool


Invest in the 401k so that you get the full match. Then go to the Roth IRA. Any extra money goes back to the 401k. Be sure your short term and emergency funds are covered before you max out the 401k.

The reason to put money in the Roth is that the earnings are never taxed, but the 401k will be taxed when you retire.
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