Skip to main content
No. of Recommendations: 0
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.

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.