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<<Read Steps 1 through 4 of our 13 Steps to Foolish Retirement Planning. They will prove most helpful in
making your decision. You can find them at this link:

I'd definitely take look at step 4. Depending on your situation, the max-out-everything approach may not be the best idea if your plan is like mine with no "Free Money" and a group of run-of-the-mill funds. I'm currently trying to decide myself where my money should actually be. The pre-tax advantage simply tacks on to the return of the vehicles within it by a factor relative to your tax bracket, and step 4 has some formulas. So for myself, I have to add that advantage to the returns of the funds within and then decide how those numbers compare to the best after-tax solution. Since they are close, I now have to look at some of the disadvantages of having my money in a 401k vs. after-tax account.

In short, the Free-Money situation is easy. Do it. But in the other case, I think that a close look at the features and limitiations of your company's 401k would be prudent before you start locking up 10k a year or whatever it may be...


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