Wednesday, April 4, 2007

Roth vs Traditional IRA vs 401k

I was browsing the Wikipedia for information on IRAs and I came across this great page. It's a matrix that shows differences between the different types of IRAs and also 401k vs IRA. Once again Wiki pulls through for great information.



Roth vs. Traditional



If the investor is at lower tax bracket now than expected retirement bracket, then Roth 401k/IRA is generally preferred. If the investor is at a higher tax bracket now than expected retirement bracket, then a traditional 401k/IRA is preferred. However, the Roth versions also have early/late withdrawal advantages, as seen below.



401k vs. IRA



It is usually best to fund a 401k plan offered by one's employer up to the maximum matched contribution. After that, it is advantageous for the investor to fund a IRA due to more flexibility in investment choices. However, contributing more to a 401k is simpler and may be preferred as an easy choice for investors seeking an easy option for investing.





Via Wikipedia

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