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Author: cmundschenk Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75880  
Subject: IRA investing and 401Ks Date: 4/14/2000 10:11 AM
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I have been reading the reports about Roth IRA's, and I want to know what others think about investing in 401K vs. Roth IRAs for young investors. I participate in my company's 401K plan, and I am planning to open an on-line account to begin investing in stocks.

Is it wiser to open a Roth IRA instead at this stage? Do I need both the 401K and the IRA? Are there significant tax advantages for a young investor? I understand the importance of compounding interest and starting early, but with the limited funds that I have to invest, I want to get the most from it. Is it more important to get involved with a Roth IRA, or begin a portfolio of stocks?

Please let me know what you think.
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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21203 of 75880
Subject: Re: IRA investing and 401Ks Date: 4/14/2000 10:39 AM
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cmundschenck wrote:
I have been reading the reports about Roth IRA's, and I want to know what others think about investing in 401K vs. Roth IRAs for young investors. I participate in my company's 401K plan, and I am planning to open an on-line account to begin investing in stocks.

Is it wiser to open a Roth IRA instead at this stage? Do I need both the 401K and the IRA? Are there significant tax advantages for a young investor? I understand the importance of compounding interest and starting early, but with the limited funds that I have to invest, I want to get the most from it. Is it more important to get involved with a Roth IRA, or begin a portfolio of stocks?


If your company offers matching funds, then it is usually better to maximize that option first. Besides the matching from your company, your contributions to a 401(k) usually come from pretax money, so it reduces your income taxes as well.

Some people invest in the 401(k) just to the point of receiving the maximum match from their employer, and then put additional retirement money into a Roth IRA. Of course, the money that goes into a Roth IRA is after you have paid the taxes on it, so you have to weigh that against the pretax money that goes into a 401(k) to see which is better for you.

-rkm

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Author: drippinfool Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21214 of 75880
Subject: Re: IRA investing and 401Ks Date: 4/14/2000 5:12 PM
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You asked "Is it more important to get involved with a Roth IRA, or begin a portfolio of stocks?"

Why not do both at the same time by starting a self-directed Roth IRA with a discount broker?


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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: 21229 of 75880
Subject: Re: IRA investing and 401Ks Date: 4/15/2000 8:21 AM
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s it wiser to open a Roth IRA instead at this stage? Do I need both the 401K and the IRA? Are there significant tax
advantages for a young investor? I understand the importance of compounding interest and starting early, but with the
limited funds that I have to invest, I want to get the most from it. Is it more important to get involved with a Roth IRA, or
begin a portfolio of stocks?


If you can, do both. Do the Roth before you do non tax sheltered investimg.

An advantage of the 401k is that it comes out of your pay check each week. You have no opportunity to spend it. This can be more important than the tax savings to people who can not save.

When you retire the money from the 401k will be taxed just as your salary is now. The money from the ROTH will not be taxed. The money from non tax sheltered investments will be taxed at capital gain rates.

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