Would my employer's 401(k) with a 75% match or a Roth IRA be a better investment?

I'm in my early thirties, lower middle class, single income to a house of four.

Asked by Jonathan

4 Answers

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Answered by Charles Scott, Financial Advisor in Scottsdale, AZ
Jonathan, To answer your question completely I would need a bit more information, but a 75% employer match would make your pre-tax 401(k) contribution look like a good idea. Also, if you could put something into a Roth IRA, even though it's after-tax money, it will never be taxed again. So try and do both if possible. | 05.20.16 @ 19:39
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 14:13
Answered by Dave Bradley, Investment Manager (Financial Advisor) in North Charleston, SC
Hi Jonathan.
As Charles mentioned, the 75% match is good. Now lets dig a bit deeper and look at what you are getting is return for that match.

This is the other side of the equation that many people put in the dark recesses of their minds.
How much do you need in retirement? What is your number? What is your MARR (Minimum acceptable Rate of Return). Rather than but the cart before the horse. Try putting a number to this. Then work backwards to ensure you are meeting/exceeding your goals. As your needs change, adjust our number. Keep in mind that having too much earlier is preferred over having too little later.

Next, what about a ROTH 401K? Our folks love our self-directed ROTH 401K. We customize it for their needs. You can also set it with a MARR to minimize fees.

Lastly, what will your future tax rate be? Keep in mind that the tax deferred savings become taxable when you are eligible to draw down the funds.. The 401k is favorable if your future tax rate is lower. The ROTH is favorable if your future tax rate is higher. Obviously, using both a 401K & a ROTH can easily negate those extra $$ you have worked so hard to accumulate.

Always do what is in your best interest. Feel free to contact us directly for more information. No obligation.

Its not what you make, Its what you keep that determines your lifestyle.
| 05.21.16 @ 15:01
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 14:13
Answered by Larry Gilmore, Insurance Agent in Marysville, WA
Can you find anything that you gives you a 75% return right off the bat? What most people do is contribute to the level of the employer match because your employer is giving you 75 cents on every dollar you invest, before you put it anywhere. That's extremely hard to beat with anything outside your employers qualified plan.

What you can decide is do you contribute more to your employers plan than the match or look for a different product for extra savings? It's going to depend on how much you want to fuss with things. If you're happy with your employers plan offerings, there may be no need to find another investment source. It's sort of what would you like to do situation with the extra funds. | 06.16.16 @ 05:49
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 14:13
Answered by Larry Gilmore, Insurance Agent in Marysville, WA
Well, you're getting 75% return before you've even invested through your employers plan. Do I need to go further? Contribute up to you match at a minimum and then do what you want if you want to dabble elsewhere. | 06.29.16 @ 00:47
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 14:13
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