IRA vs 401K??

[hngrygrl]

hey business savvy ppl!

I have about 2500 that I invested when I was 15 (it was only 1000) in a mutual fund that I'm looking into putting into a retirement plan. I'm only 25 but its never too soon to think about retirement, I know I do daily.

I also have (will have) about $6000 in a retirement plan at my job. No one the funds are any that I have put in, its all employer contributions. I believe that I am officially "vested". Does that mean when I leave the company that I can take that money with me?

More importantly, what is the diff bt a Roth IRA and a 401K??? Which is better in the long run??

Thank you
Lindsay

 

[EVERLAST]

ROTH VS 401

Hey the roth lets you pay tax now and not later when you take it out to spend it during your golden years... theorhetically the rates will be higher (historically true) so the roth is a good deal.
Why not do both?!?!? ask your accountant for details, or PM Sassy!
Shes the investment pro.....

 

[leegee38]

They are discussing making 401K plans available for everyone, but at the moment I'm pretty sure your employer has to provide one ... You can't just start one yourself. An IRA, Roth or otherwise, is probably your only option unless I'm not understanding your situation properly.

 

[Sassy]

A 401K is offered by your employer and it isn't set up to add money except by deduction from your pay check. You can still put money in a retirement plan outside of your 401K via traditional IRA or Roth IRA. LIke Everclear said the traditional IRA isn't taxed until you take it out during your retirement. Where the Roth is taxed now, so you don't have to pay taxes when you retire. THe Roth is also suppose to be more flexible. It will let you take out deductions without penatlies anytime tax free. Now someone might should confirm this, because I was understanding that the early deducations were to be for purchasing a home or college funds, but maybe that has changed too. The traditional IRA will be pentalized for early withdrawals.

Some things to consider in your decision is if you need the tax deducation now or later, and do you want to have the option of early withdrawl. In theroy the tradational IRA is good for someone with high income and needs tax deductions now, and when they retire it is assumed that their income will be much less, so the taxes will be less for them.

Also you can make any type of investment an IRA... stock, mutual fund, bonds, CD, etc, so it is best to consult an advisor for more details or which investment best suits your needs.

 

[buffbabeca]

How long have you been with your job.. i know when I left my job a few years ago.. i left after 3 years and I was fully vested with the company so I got to take all of the money and roll it over into another 401k

 

[NINJA]

retirement

My father is on disability....my parents owened a business for 30 years but never set anything up.
What should my mom do now as she is 55 but her boss offers nothing, if the employer offers nothing is there way to get part of her paycheck into something before it is taxed? As if she wanted to put in 200 per month that would only be about $143 if it is taxed first...thanks

 

[Sassy]

Hgrygrl... your company sets up the time frame for being fully vested. The company I'm working for now gives employees a year and they are fully vested. Some companies make it up to 5yrs. My former employer cheated me out of my money. When I first started working for there they didn't have a plan, a year later they started one and told us that since we were the first to sign up that everyone was fully vested. People who started after that initial sign up date had to be there for 5 yrs. I left just 9 mon shy of 5 yrs. They said I wasn't fully vested and wouldn't give me all the money.

Ninja, your mom can have an automatic depost made into an Roth or traditional IRA. Any investment company will set up an account with an automatic depost. However, I'm not sure if it will be from her check or account. She will just have to ask. The Roth will be taxed and the traditional would be untaxed until she withdraws it. Check out the thread "5-10K to invest..." for suggestions and info on funds, etc. Good info in that thread.