Conventional Wisdom on 401k (Re: Question on bond fund)

wrote

If you're saying some people probably should put into the 401(k) as much as the employer matches (call that X dollars) plus Y dollars more, up to I believe the current, federal $14k limit, then I suppose you're right that this is rational for some people.

But I think increasingly the counsel is to only put the X dollars into the

401(k), and then, if one qualifies, put Y into the Roth IRA. The reasoning is that, with this country's huge deficits, I and others expect tax rates to be higher 20 years from now than today, so I'd rather pay the taxes on the Y dollars today than 20 years from today. In addition, the earnings of the contributions to the Roth IRA of course grow tax-free.

So if you don't want to call my proposal above "conventional wisdom," then fair enough. But I with I think many others think it deserves strong consideration.

Actually, one of the biggest advantages to the Roth is that you can withdraw contributions after 5 years (IIRC), which means you are not absolutely committing that money to retirement (assuming you are already putting enough in the 401(k) to handle your normal-age retirement).

Michael

Actually, one can withdraw contributions anytime from a Roth IRA.

"Michael Sullivan" wrote