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Author: BGPenhollo Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: Which is better: 401(k) or Roth IRA? Date: 10/5/2000 2:08 PM
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isogyre posted..

"Would it make more sense to contribute $2,000 per year to my Roth IRA and only contribute $4,000 to my 401(k)? I will still get the full employer match.

In other words, which is better: lowering my current taxes through higher 401(k) contributions or paying higher taxes now and maximizing my Roth IRA contributions?

I am not planning to retire for at least 40 years. "


1st off, I have always felt that I should contribute to 401K at least what it takes to get the maximum employer matching. It sounds like $4,000/yr will garner the max that your employer will contribute to your 401K.

With 40 years to retirement, I am assuming you are fairly young (low 30's at best). Your marginal tax rate is probably low but in 40 years it is unlikely that your tax rate will be this low so..

Is it better to pay 15% or 28% (present marginal rate) today if you use a Roth or 28%, 31% or 39% 40 year from now if you use a traditional IRA.

BGP
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