Comments on: Choosing The Best IRA For Your Needs: Traditional Or Roth

By: The David

The David — Mon, 09 Mar 2009 16:59:00 +0000

Good summary…I’m hoping to branch out into #2 this year.

I’m already investing in my company’s roth 401K, which has the benefit of built in diversification. My contributions go in as a Roth, whereas their match is traditional.

@ Sky – I think one thing you may want to consider if that there are much stricter income limits on an IRA than there is a 401K.

I could be mistaken, but I think there is no income limit on a 401K, just a contribution limit of $16,500.

However, with the IRA, there is an income limit ($166,000 – $176,000), as well as a much lower contribution limit ($5000).

That’s why the traditional logic says only invest in a 401K to get the match, then go to outside IRAs.

If your income goes up, you may lose the ability to contribute at all to an IRA. However, you can always put more money in a 401K later.

By: Sky

Sky — Mon, 09 Mar 2009 14:31:09 +0000

I just have one question. The company that I work for has an excellent amount of options for the Roth/Traditional 401k. They match 50% of 8%, so a max of 4%. So far, I don’t see the point of getting an IRA when I have plenty of options with my 401k. I am currently able to contribute 17% of my income to a Roth 401k, but would I benefit from only taking up to the company match and then opening an IRA for the rest? I also like the simplicity I have now with it all being in one place. So far, most people seem to choose an IRA because it has more diverse funds, but I don’t seem to have that problem.

Maybe in another article you could talk about reasons to choose a 401k vs an IRA, and their differences.

By: PT Money

PT Money — Sun, 08 Mar 2009 18:43:21 +0000

Great summary, Kyle. This will be the first year that we’ll contribute to both 401k and Roth IRA. I agree with your final order of things. At least that’s logically what works for us.

By: Kyle

Kyle — Wed, 04 Mar 2009 16:26:22 +0000

David, good call on the 401k up to the company match. I updated the post.

By: David

David — Wed, 04 Mar 2009 16:16:15 +0000

This article sums it up nicely. I would add that you should first invest in your 401k up to the company match, then max out the Roth IRA, and then, if there’s any money left, contribute more to the 401k or traditional IRA.

@Curt – if you have some money you can save away for 30+ years, it goes a long way in funding your retirement. There’s plenty of articles on the web that explain that in more detail – probably even one on this blog.

By: Curt

Curt — Wed, 04 Mar 2009 15:54:51 +0000

Excellent article. Thanks for explaining the differences. The primary hesitation that I have with all of these plans is that I cannot get my money for 30+ years. That is not acceptable.