which is better to do these days? I want to start contributing more than 6% of my income to retirement, but I wasnt sure if I should bump up my 401(k) past the % of company match, or to stop at the match and start funding a ROTH IRA? I am 24 yrs old, so I have lots of time on my side.

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1984 300SD Orient Red/ Palomino
1989 560SEC
2016 Mazda 6 6 speed manual
1995 Ford F-150 reg cab 4.9 5speed manual

One scenario: Put it in a 401k if you are...

1) close to retirement age

2) in a high taxeable income bracket, say 28%.

Suppose make a lot of money and put in a a Roth IRA. You would have gain 28% on your investment before you break even had you put it in a 401k. With the markets the way they are these days, this might take many years. If you are going to retire soon this might never happen.

So anyway, a lot depends on how much you make, when, and how long before you intend to retire.

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You don't need a weatherman to know which way the wind blows - Robert A. Zimmerman

I got a good 40 years til I retire.

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1984 300SD Orient Red/ Palomino
1989 560SEC
2016 Mazda 6 6 speed manual
1995 Ford F-150 reg cab 4.9 5speed manual

40 years is a good long time. A Roth IRA makes sense. Next, if you are close to the limit on your allowed contributions, you may be able to contribute post tax to your 401k.

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You don't need a weatherman to know which way the wind blows - Robert A. Zimmerman

If you're close to the cut off point for a lower tax bracket, bumping up your 401K deduction at work might lower your tax rate as well as your taxable income. I don't trust Congress not to find some way to tax the money I would get from a Roth IRA.

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" We have nothing to fear but the main stream media itself . . . ."- Adapted from Franklin D Roosevelt for the 21st century

OBK #55

1998 Lincoln Continental - Sold
Max 1984 300TD 285,000 miles - Sold
The Dee8gonator 1987 560SEC 196,000 miles - Sold
Orgasmatron - 2006 CLS500 90,000 miles
2002 C320 Wagon 122,000 miles
2016 AMG GTS 12,000 miles

You didn't mention if you get matching from your company. If you do, max that out first as that is free money you are throwing away if not used.

Then, most likely you will be better off with the Roth IRA, but it is dependant upon certain factors as Kuan mentions. Most likely getting your money in the market now (in the next few years) either way will be great if you don't want it for another 40 years.

For me, the plan is max company matching into 401k (403b for me) first. Then max the Roth IRA, then back to the 401k (403b). I'm not maxing anything right now, just my plan when I (hopefully) get there.

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2009 ML320 Bluetec
1985 300CD
1981 300TD

Past Mercedes
1979 300TD
1982 300TD
2000 E320 4Matic Wagon
1998 E430
1984 300SD
1980 300SD

hmmmm. so if i am close to the bottom of my tax bracket, i could possibly bump myself into a lower one with more contributions to 401(K)? very sneaky. I'll have to look into that.

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1984 300SD Orient Red/ Palomino
1989 560SEC
2016 Mazda 6 6 speed manual
1995 Ford F-150 reg cab 4.9 5speed manual

yeah 6% is the match. I know throwing money right now into a 401(K) is like throwing it into a black hole, but maybe I can get some stock bargains.

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1984 300SD Orient Red/ Palomino
1989 560SEC
2016 Mazda 6 6 speed manual
1995 Ford F-150 reg cab 4.9 5speed manual

General rule of thumb is to max out your 401K contribution because you likely get matching and it lowers your taxable income.

If you have any money left over, then start contributing to a Roth IRA.

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Paul S.

2001 E430, Bourdeaux Red, Oyster interior.
79,200 miles.

1973 280SE 4.5, 170,000 miles. 568 Signal Red, Black MB Tex. "The Red Baron".

That's just to make you feel better. It's not sneaky. Believe me the IRS is sneakier than you. We all agree on that right? All things remaining equal:

If you are single you pay 10% on income up to $8,350.

You pay 15% on income between $8,350 and $33,950.

You pay 25% on income between $33,950 and $82,250.

So if you make $35,950 you pay $835 on the income up to $8,350, $3,840 on the income between $8,350 and $33,950, $500 on the next $2,000 for a total of $5,175.

If you take the final $2k and put it in your 401k you get to pay $500 less in taxes, but you still have to pay that money. It's not like you get to pay a lower percentage on all your money just because you put $2k more into your 401k.

It is not throwing it into a black hole. If you are in an index fund you are purchasing shares at a discounted price. The minimum you can "make" is already 10% and that's if you make under $8,350 a year. If you are over $35k then you will "make" 25% immediately on your investment. Your money has to lose 25% before you actually start losing money. If the market does nothing, you will have to gain 25% in your Roth IRA before you break even.

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You don't need a weatherman to know which way the wind blows - Robert A. Zimmerman

Then definitely max out the matching first.

Look at it like this. Say for simplicity, 6% is $1000. You get an extra $1000 free and clear to use to invest. If you don't use it, then you have $1000 less to invest and will have lost it. In essence you will have lost $1000 if you don't use the matching.

Definitlely max the match first. Then, since you are young, it probably doesn't matter much what you do next.

IMO, the main difference is that you either get taxed now or taxed later. 401k is taxed later, Roth IRA is taxed now. Generally, people are in higher tax brackets later in life than they are when they are young.

__________________
2009 ML320 Bluetec
1985 300CD
1981 300TD

Past Mercedes
1979 300TD
1982 300TD
2000 E320 4Matic Wagon
1998 E430
1984 300SD
1980 300SD

Contribute up to what the company will match in your 401(k) and any other money you have available to invest in a Roth IRA. Choose a diversified mutual fund portfolio in both and rebalance annually.
As you get older and your income changes (probably increases) it's a good idea to examine more complicated strategies (especially if you wind up running your own business) but for the typical wage earner the above strategy will serve you well.

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1983 M-B 240D-Gone too.
1976 M-B 300D-Departed.

"Good" is the worst enemy of "Great".

This explains the different retirement savings arrangements and has a calculator to compare the relative benefits of each.

http://www.smartmoney.com/personal-finance/retirement/which-ira-is-best-7968/

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1983 M-B 240D-Gone too.
1976 M-B 300D-Departed.

"Good" is the worst enemy of "Great".

First, buy a Ouija board.

[quote=Botnst;2098159]First, buy a Ouija board.[/quote

yeah I need to go see Mrs. Cleo

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1984 300SD Orient Red/ Palomino
1989 560SEC
2016 Mazda 6 6 speed manual
1995 Ford F-150 reg cab 4.9 5speed manual