Roth IRA or 401K - Which is Better?
By Kristine McKinley

Q: I am trying to decide if opening and contributing to a Roth IRA would be a better option than contributing over and above what my company matches in my 401K.

A: Ideally, it’s best to max out both your 401K and Roth IRA accounts; the more you can save for retirement the better. However, for many people this is not possible, so the question then becomes which account should I invest in first?

Generally, it’s best to invest in your 401K plan first, up to the amount your employer will match, then to invest in a Roth IRA. If you have additional funds to invest after making the maximum contribution to your Roth IRA, you should max out your 401K, and then invest in taxable accounts. There are always exceptions, however, so here are some points to consider when deciding the best order to invest your retirement funds:
Roth IRA or 401K Continued

There's a New 401k Coming to Town
By Simon Fox

Income tax rates have been cut, the marriage penalty done away with, and the "death tax" is also on a path to no more. All of this is a result of the Bush administration's Economic Growth and Tax Relief Reconciliation Act which was passed by a Republican congress in 2001. Another provision of that act goes into effect on January 1st, 2006, a hybrid of a traditional 401k and a traditional Roth IRA called the Roth 401k.

Yet another employer sponsored savings plan, the new Roth 401k works in almost the same way as a traditional 401k plan. Workers invest a portion of their income into a fund along with contributions from their employer (if any). The difference is that the traditional 401k is funded with "pre-tax" dollars and the Roth 401k plan uses "after-tax" dollars. However, with the Roth 401k, withdrawal of your money at retirement will be tax free like a Roth IRA. The traditional 401k plan defers the tax owed during your career until retirement.
There's a New 401k Coming to Town Continued

The NEW Roth 401k Plan
By Stuart Simpson

There’s a new retirement plan soon to be available. It’s called a Roth 401k. President Bush brought this about in his 2001 tax cuts. This is a combination of two retirement funds – a 401k and a Roth IRA. But what does it mean?

Your 401k plan is pretax money set aside to grow as an investment. Your employer takes pretax money out of your check and allows you to direct the funds usually into mutual funds. 401k’s have another advantage – since it’s pretax money you take out of your check, your net pay is lowered, reducing the amount of taxes you pay. When you retire, then you draw out of your 401k what little you need and pay the taxes on it. When you retire, your income stream is gone, and so is your tax bracket. As you draw out your money from your 401k, then you hopefully enter a relatively low tax bracket and pay little on the proceeds.
The NEW Roth 401k Plan Continued

Enron 401K Program
By Lance Winslow

You know in reviewing the Enron 401K program there was nothing wrong with it. The only real negative was that they had to hold the matching funds until age 50. The program had lots of options and it was structured great. Actually it was a model program for a modern day corporation.

The stock options were the problem. Everything else was good. It was probably better than most Vanguard or Fidelity programs with low fees or worse off some annuity with hidden fees, penalties and restrictions or an Annuity Insurance Company which files bankruptcy leaving you high and dry.
Enron 401K Program Continued

Roth 401K- A Parlay For the Privileged
By Lawrence Groves

A new opportunity for savings came to town. Known as the post tax ROTH 401k - this is the classier sister to the traditional 401k plan. On one side is the post tax Roth 401k, with a fuller bodied contribution as taxes are included on the front end. There's also a five year wait to end the relationship and take a tax free withdrawal. On the other side is the pre-tax traditional 401k, a tax stripped model with no wait on distributions. But you pay the taxman for both the contribution and the earnings on withdrawal.

Now comes the trouble--- which sister to choose?

Ready to roll the dice? You're going to have to consider the following:
The tax code structure-will the tax structure be more difficult when you are ready to retire?
The marginal tax rates-will they be higher or lower at your retirement?
The inflation rates-will they be to low or to high for you to benefit?
Roth 401K- A Parlay For the Privileged Continued