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Subject:  Re: Old IRA versus New 401k Date:  1/29/2000  4:04 PM
Author:  GeraldGarcia Number:  18431 of 100487

Glad that you posted your question. It speaks to some of the things that I think about in considering 401k versus IRA.

First, I would suggest you consider a Roth IRA if you haven't already. At your current income, with family considerations, you may need the extra deduction that a traditional IRA offers. If, however, you're able to do without it, then consider a Roth IRA.

Second, consider whether converting (what I assume is a traditional IRA) to a Roth IRA. If, by contributing the maximum (15%) and your employee match yields (you don't specify the %, but usually it's between 2 and 5%) $5K, you earn about $27000. The taxes you might pay on your (fantastic) investments may probit you from choosing this, but if you can, you'll thank yourself when your 59 1/2 and older. You either are in the 15 or 28% tax bracket, probably the 28%, which would shoulder you with significant capital gains payments due following the tax year of your conversion. It may pay for you not to make any retirement account contributions to pay the tax consequences of the conversion in exchange for your upside over the next 30 years.

Finally, since you must choose between the two, consider whether you will anticipate having other "hot tips" like Oracle and Wal-Mart or if your $ might better be managed by someone else. If it's the latter -- no shame in that -- roll over your IRA to your 401k and sleep well (but pay a premium for the service) by investing in what your company allows you to select from. I probably would keep the two accounts distinct, however, and invest in the Foolish 4 or indices (given a lack of time to be more thorough, which I get from your message but doesn't match me personally), and hold on tight.

Just MHO. Good luck!
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