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Author: drs Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75339  
Subject: Roth v 401k Date: 2/24/1998 9:18 AM
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Does it make any sense to invest in a 401(k) plan at work that has no matching contribution if I already contribute $2000/year to a Roth IRA? I know the 401(k) allows me to save more money, but if I can only save $2000/year right now, should I put the money in the non-matching 401(k) or the Roth?
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Author: tc001 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1947 of 75339
Subject: Re: Roth v 401k Date: 2/24/1998 4:54 PM
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Maybe it makes more sense to find a better company to work for. (Sorry, you probably already heard that before)

With no company match, I would put the money into an IRA. You get the BIG advantage of being able to select where the money is invested. Many 401k choices are simply terrible. And if you want to save more than $2000, then put the rest into the 401k.

Just be aware that if you go with a Roth IRA instead of a regular IRA, you will lose the current year tax advantage of the 401k. But you will have other tax advantages with the Roth, such as future tax-free withdrawals. The tax question is something you will need to decide for your own specific situation.

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1948 of 75339
Subject: Re: Roth v 401k Date: 2/24/1998 5:40 PM
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Greetings, drs, and welcome.

<<Does it make any sense to invest in a 401(k) plan at work that has no matching contribution if I already contribute $2000/year to a Roth IRA? I know the 401(k) allows me to save more money, but if I can only save $2000/year right now, should I put the money in the non-matching 401(k) or the Roth?>>

You have to look at your alternative rates of return. Fools believe we can beat the rates in most 401K plans by investing the money is securities we select ourselves. For that reason, in the absence of an employer match and given I would have but $2K to invest, I would go for the Roth where I can choose the securities for purchase. But you have to decide that for yourself.

There is one thing nice about a 401k, though, particularly for someone on a tight budget. The money goes in automatically via a payroll deduction. Invest outside the 401k, and you will have to exercise strict discipline to do the same, and sometimes that's tough to do. Other demands for limited resources will sorely tempt you to skip the savings "just this once." Do so, and you will be better off in the 401k regardless of how poor it is. The missed savings and compounding will never be made up.

Regards…..Pixy


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