Chit Chat

What do you prefer 401K or Roth IRA and why?

NAJNAJ member
First Comment First Anniversary
edited January 2016 in Chit Chat

Which one do you like and why in your opinion. I'm considering to transfer to a Roth but haven't researched it on whether it's better or not. May possibly withdraw some money for emergency even though I know It will be taxed.. Which one do you think is better


Re: What do you prefer 401K or Roth IRA and why?

  • Talk to a financial advisor.
  • Anyone else starting to feel like we're test subjects for some strange type of research? 

  • Well first of all, most 401ks have a company match. If you don't use it, you leave behind 1-5% or more of your salary that is able to grow. I know someone who ditched his because he didn't like the managing company but what was he saving by choosing his own funds and leaving behind free money?
    The Roth has its own benefits too. So get both.
    ________________________________


  • Some people do not qualify for Roth IRAs. So, there's that.

     







  • @NAJ - why do you ask?
                       
  • Anyone else starting to feel like we're test subjects for some strange type of research? 
    I hear you - doesn't participate in any other discussion, asks incredibly specific questions on cc. Hmmmmm.


                 
  • What's wrong with having both?



  • Roth 401k would be my pick!  It depends on your age if it's worth it to invest with after tax dollars.  

    image

    Daisypath - Personal pictureDaisypath Anniversary tickers

  • I might need to withdraw some money and wasn't sure of the penalty or if there is a difference between the 2 if taking out but I might open up a roth as well and have both. Thanks
  • NAJ said:
    I might need to withdraw some money and wasn't sure of the penalty or if there is a difference between the 2 if taking out but I might open up a roth as well and have both. Thanks


    My 401K allows a loan and you pay yourself back with interest. No penalty. But, you need to talk with the management company that holds your money to see about penalties.

    I know nothing about Roth IRAs because I don't qualify.

    I do have a Roth 401K, which is nice as long as you get your company match in a traditional 401K.

    I have a financial advisor and do what works for my plan. Definitely check with someone who knows their shit.

     







  • NAJNAJ member
    First Comment First Anniversary
    edited February 2016

    Thanks ladies... I might open up a Roth if I qualify. I will withdraw some money and wasn't sure if Roth's work diff. I don't know why glasgowlondon thinks this is a test on a community chat.. If you don't want to answer move on if you don't what want to answer


  • There is a 10% penalty for withdrawing from your 401k, and then you pay ordinary income tax on top of that (assuming you are under 59.5 years).
    If you take money out of your 401k to put in a Roth, I believe you only pay the income tax, but you have to make sure it's a direct rollover. 


    image

    Daisypath - Personal pictureDaisypath Anniversary tickers

  • I'm under the age of 50 ... thanks luckya2

  • NAJ said:

    Thanks ladies... I might open up a Roth if I qualify. I will withdraw some money and wasn't sure if Roth's work diff. I don't know why glasgowlondon thinks this is a test on a community chat.. If you don't want to answer move on if you don't what want to answer


    No offense intended, but it's possibly because your OPs sound like survey questions. We frequently get vendors who are phishing or advertising their businesses, which isn't allowed. 
                       
  • Anyone else starting to feel like we're test subjects for some strange type of research? 
    I hear you - doesn't participate in any other discussion, asks incredibly specific questions on cc. Hmmmmm.


    Maybe it's actually...

    https49mediatumblrcom025945b9728c3f411643a4de6fbfccfatumblr_moi5mnReof1rtbkkjo1_250gif

  • NAJ said:

    Thanks ladies... I might open up a Roth if I qualify. I will withdraw some money and wasn't sure if Roth's work diff. I don't know why glasgowlondon thinks this is a test on a community chat.. If you don't want to answer move on if you don't what want to answer


    I didn't answer your question though....I was talking to @drunkenwitch, not to you. 
                 
  • Heffalump said:
    Anyone else starting to feel like we're test subjects for some strange type of research? 
    I hear you - doesn't participate in any other discussion, asks incredibly specific questions on cc. Hmmmmm.


    Maybe it's actually...

    https49mediatumblrcom025945b9728c3f411643a4de6fbfccfatumblr_moi5mnReof1rtbkkjo1_250gif


                 
  • Some people do not qualify for Roth IRAs. So, there's that.
    You could always get in via the backdoor Roth IRA conversion.  Not sure how much longer that's going to last though!
  • JoanE2012 said:
    Some people do not qualify for Roth IRAs. So, there's that.
    You could always get in via the backdoor Roth IRA conversion.  Not sure how much longer that's going to last though!
    I have a Roth 401k, as well as a traditional 401k, so that keeps me content for now. It is really frustrating to keep hearing about how social security is going away, not to mention they froze our pensions this year, yet I'm completely maxed out on 401k contributions, the banks pay shit in interest, and the stock market has been a total mess!! It's like they don't want you to save at all! 

     







  • NAJ said:

    Thanks ladies... I might open up a Roth if I qualify. I will withdraw some money and wasn't sure if Roth's work diff. I don't know why glasgowlondon thinks this is a test on a community chat.. If you don't want to answer move on if you don't what want to answer


    I didn't answer your question though....I was talking to @drunkenwitch, not to you. 

  • 401k- contributions are pre-tax (lowers your income for tax time), and it grows tax-free. You only pay taxes when you take out money. Limits are 18k (under 50) 24k (over 50) a year.  If you take out money before 59.5 you pay a penalty (10%) PLUS taxes.

    Roth IRA- contributions are post-tax. You can take out whatever money you have contributed tax & penalty free at any time. There are taxes and a penalty if you take out any 'growth' before 59.5. For ex- you put in $2000, but your balance is $2500 due to investment growth. You can take out $2000 tax/penalty free, but will pay taxes and penalties on the $500 if you withdrew the whole amount/ any amount over $2000. Limit I believe is $6000/year. 

    If you roll over your traditional 401k into a roth account, you will need to pay taxes as the money that's in there hasn't been taxed yet. Not a good idea. Open up a Roth IRA if you forsee needing to possibly take money out before 59.5- or open up a brokerage account. 
  • Never take money out of a 401k unless you are of age.. you'll pay taxes twice as well as a penalty. Also, 401K's are protected against bankruptcy.. so if you ever needed to file for whatever reason, you will still have your 401k.

    Continue to contribute to your 401K up to the company match (Free money!!). Take whatever additional money you want and invest in an Roth. I have one through Vanguard. Very easy to set up, and low expense ratios. You can contribute $5,500/ year. Like pp have said, you can withdrawal your principle any time penalty free.. however, you can only put in a total of $5500 per year- which means if you put in 3K and then take 3K out, you can still only contribute an additional 2K for the year.

    Dollar cost averaging is really the best way to do it (put in a little bit every pay period and don't touch it, let it build over time) for maximum returns. If you have a long way to go before retirement- invest in a good mutual fund index- it will give you the best yield.
This discussion has been closed.
Choose Another Board
Search Boards