Skip to main content
No. of Recommendations: 0
My wife and I have recently received or read several recommendations that we reduce our 401(k) contribution and fund Roth IRAs.

From a wealth accumulation point of view, is this Wise? Or Foolish?

Max out both.

I started off with a one-time $2000 contribution this year. I assumed I'd pay 28% tax on the money going into the Roth, so I subtracted that off the top and invested the balance ($1,440, I think) into the Roth in column A. In column B I stuck the whole $2000 into my 401(k).

When you run the figures like this, the only difference is in your tax rate at retirement. The reason must calculations show the Roth as better than the regular IRA, is that you effectively get to invest more in a Roth. In this sense you can't really equate the regular IRA to a 401(k), since the latter allows you to invest a lot more.

I started to type an explanation, but I can't explain it as clearly as Kat has done, so I'll simply provide a link to his web site:
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.