401K vs IRA

[WYDD]

so, my wife is a dental hygienist and doesn't have 401 k or anything like that. I've been doubling up on my 401k since about march. Would it be smarter to put her part of that money in an IRA since my company matches up to 6% but i'm putting more like 12% in there?

[slydevl]

Personally I would recommend her starting a Roth IRA with her piece of retirement savings. That way you diversify your tax advantages with both a post tax and a pre tax retirement vessel.

[meatpile]

so, my wife is a dental hygienist and doesn't have 401 k or anything like that. I've been doubling up on my 401k since about march. Would it be smarter to put her part of that money in an IRA since my company matches up to 6% but i'm putting more like 12% in there?

Yes. And you can also make it a ROTH, unless you really need the deduction.

[meatpile]

:trophy:

[Freakshow]

so, my wife is a dental hygienist and doesn't have 401 k or anything like that. I've been doubling up on my 401k since about march. Would it be smarter to put her part of that money in an IRA since my company matches up to 6% but i'm putting more like 12% in there?

Your money is coming out PREtax...the IRA would be deducted at the end of the year. With the ROTH you will get ZERO tax benefits NOW. But you won't pay on what you make...when you take it out!

[WYDD]

Yes. And you can also make it a ROTH, unless you really need the deduction.

i had thought about a Roth but i'm pretty fucking ignorant. Meatpile, the Roth in a nutshell please.

[slydevl]

i had thought about a Roth but i'm pretty fucking ignorant. Meatpile, the Roth in a nutshell please.


The Roth is post tax and you are limited to $2000 each per year for $4000 total.

Freak is right. Taxes are taken out now but you don't have to pay taxes when you withdraw the money later. Basically it is a means of hedging your tax liability when you retire. If you are in a higher bracket you win with the Roth. If you are in a lower bracket, you win with the 401K.

I'm pretty sure it is easier to borrow against the Roth for things such as paying your kids education or buying a home without paying taxes.

[meatpile]

Roth IRAs are not deductible, like your 401k, but you pay ZERO taxes upon withdrawal.

You can put $6k per year away, maybe 12 if you file jointly?

[slydevl]

Roth IRAs are not deductible, like your 401k, but you pay ZERO taxes upon withdrawal.

You can put $6k per year away, maybe 12 if you file jointly?

They raise the limit?

[Freakshow]

The Roth is post tax and you are limited to $2000 each per year for $4000 total.

Freak is right. Taxes are taken out now but you don't have to pay taxes when you withdraw the money later. Basically it is a means of hedging your tax liability when you retire. If you are in a higher bracket you win with the Roth. If you are in a lower bracket, you win with the 401K.

I'm pretty sure it is easier to borrow against the Roth for things such as paying your kids education or buying a home without paying taxes.

Also easy to borrow from a 401k...

Depending on the plan...it's a pretty good deal. Say you borrow $50,000 out of your 401k and have to pay 6% interest...the 6% goes to YOU. So you are paying back yourself...plus the interest.

[meatpile]

EDIT -

Here's the limits:

IRA Contribution Limits

YEAR AGE 49 & BELOW
2002-2004 $3,000
2005 $4,000
2006-2007 $4,000
2008 $5,000

[WYDD]

ok. well, my wife is temping now so there's no guaranteed weekly paycheck coming from her. so i'm guessing that 401k is the way to go until she decides on a full time office.

[meatpile]

They raise the limit?

Yep.

http://beginnersinvest.about.com/cs/iras/a/iracontribution.htm

[meatpile]

ok. well, my wife is temping now so there's no guaranteed weekly paycheck coming from her. so i'm guessing that 401k is the way to go until she decides on a full time office.

Not if you're doubling up and not getting matched. Might as well start putting the extra in the ROTH.

[slydevl]

ok. well, my wife is temping now so there's no guaranteed weekly paycheck coming from her. so i'm guessing that 401k is the way to go until she decides on a full time office.

Most advisors will tell you to max out your 401K before thinking about a ROTH. I happen to think a little differently. Max out what your company will match in your 401k and then dump the rest in a ROTH tweaking up your 401K % when you max out the ROTH contribution.

Once you max out both then you need to look at tax "advantaged" (not a true tax benefit but they pay attention and try to limit tax hits when buying and selling assets) funds

[WYDD]

i need an advisor. a free advisor. too much thinking involved.

[slydevl]

i need an advisor. a free advisor. too much thinking involved.


Read.

Start here

http://money.cnn.com/pf/expert/

this kinda hits on your question

http://money.cnn.com/2006/08/01/pf/expert/expert.moneymag/index.htm

[WYDD]

preesh, TIA, TIAA-CREF.

[meatpile]

Vanguard!