401k Vs. IRA?
Wednesday, January 30th, 2008
Wayne D asked:
My company doesnt match 401k until 1 year of service and that will be end of July next year. I am currently contributing 75% of my semi-monthly paycheck into 401k. Is this smart? I heard its smart because I avoid federal taxes. My take home pay sucks but I dont really need the money right now. The investment options I have are stock, mutual funds (large/medium/small cap etc) and also a stable fund (not much interest).
My company doesnt match 401k until 1 year of service and that will be end of July next year. I am currently contributing 75% of my semi-monthly paycheck into 401k. Is this smart? I heard its smart because I avoid federal taxes. My take home pay sucks but I dont really need the money right now. The investment options I have are stock, mutual funds (large/medium/small cap etc) and also a stable fund (not much interest).
In my Rollover IRA account from my previous employer, only a small amount is invested, but it’s a life-cycle fund (where it will go until the year I retire) and the ROI is high and I can do that since I am young.
Should I stop investing in 401k and contribute my money to my life-cycle fund/IRA account ($4k max per year) which has a higher interest rate? or should I keep 401k, keep avoiding taxes, and contribute 60% to company stock based on my deductions and 40$ to the Bond investment (stable fund)? Thanks I’m trying to make my money work hard for me.
Question posted courtesy of: Michael
