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Author: Linne Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76915  
Subject: Re: 401(k) and foolishness revisited Date: 4/16/1998 12:08 AM
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<< My company is nice enough to match the first 3% of my contribution 100% and the next 3%
contribution is matched 25%. If I invest 6% I get a free 3.25% from the company. You don't have
to be a Fool to understand it's
free money but should I invest the full 15%? or just the 6% and take my other 9% elsewhere? >>

Ray replied:
<<I believe that, in general, the optimal ordering would be:
1) deductible IRA (if eligible)
2) 401(k), enough to capture the entire employer match
3) Roth IRA (if you can't do #1)
4) Max out the balance of the 401(k)
5) ordinary taxable account.>>

Shouldn't #1 and #2 be reversed? A deductable IRA can't reasonably outperform the 62% free money, even if the 401(k) gets a 0% return.


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