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401k or Roth

Posted by on Jun. 29, 2013 at 3:51 AM
  • 5 Replies
We are trying to decide which way to go. DH is sole breadwinner, though I am trying to get started with Arbonne. He is 54 (in November) I am 44. We make about 25k per year and have 2 small children. Thoughts? Suggestions? Websites? Thanks

by on Jun. 29, 2013 at 3:51 AM
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by Malena on Jun. 30, 2013 at 12:03 PM


by Bronze Member on Jul. 1, 2013 at 7:48 PM

Does his company make a matching contribution to his 401k?

If I am remembering correctly, he can contribute up to $17,500/year to a 401k and since he is older than 50 he can contribute an additional $5500.  (I know, not really practical for most folks.)  I believe he can contribute $6500/year to a Roth.

To me, if it's an "either or" situation and his company matches up to, let's say 3%, I would probably put in as much as I can into the 401k and get the match as well.  Do you have a Financial Advisor? 

by Member on Jul. 1, 2013 at 8:07 PM
If the company has a match, do as much as you can there. Even better, try to get the company to add (if the don't already have it) a Roth 401k, that way the only money that would be taxable would be the company match. If no match, a Roth- because I'm suspecting with the amount you make you will not be maxing.
by Malena on Jul. 1, 2013 at 9:25 PM
My understanding is he can begin contributing from day one but company matching doesn't start until he has been there 90 days. I am not sure what they match to. We definitely will not be maxing this year.
by Member on Jul. 8, 2013 at 11:18 AM

The Difference is in the taxes...
A traditional 401K plan is put in with $$ that is not taxed right now, so when you take money out they will tax the whole thing. So you put in $500, and when you get out the $50K, they tax it.
Also on the 401K plan they REQUIRE you to start taking a minimum amount of money out at 70 1/2 years old, so that you start paying taxes on it.  

A Roth... you pay the tax now on the $500, then put in the rest, and when you take out the growth of $48K,  you get the whole thing. 

Another key factor is control. You always want to have as much control over your own money as you can. 
In the company's 401K they set out a list of funds you can invest in. Sometimes this is very good, but you have to do your research on them for sure.
In your own ROth plans, you'll get to pick from any funds in the world. This of course requires a lot of research, and maybe a good financial advisor.

Best Bet: Do both.
Do the 401K plan up to the match percent. That's like a bonus check from his company. Then do another 8-10% of your annual income into Roth IRAs for both of you.

When deciding how much to do in yours or in his Roth, there's a couple factors.
(Yes, you can put money in the Roth even as a stay home mom or part time working.) 

1. If you die, your spouse gets the money from your retirement account. So it's like an additional life insurance money for him to use to care for your kids. 

2. If one of you is a lot older than the other, consider the age that you can start getting money from the accounts without penalty. I believe it's 59 1/2. But if one of you were sick it would be nice to have access to that money sooner than later. 

So for my husband and me... we do his 401K up to the match, and then invest into my Roth up to the max for the year and then a little in his Roth.

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