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re: Just got a new job making nearly 50k.
Posted on 5/27/16 at 8:54 am to DeboseKnows
Posted on 5/27/16 at 8:54 am to DeboseKnows
quote:
Where is the best place to open a Roth IRA? How does it differ from a 401k
Vanguard or Fidelity (I do Vanguard)
Main difference is the tax advantage. 401k is deferred on your taxes now, but taxed later when you withdraw. Roth isn't deferred on your taxes now, but is tax free when you withdraw (assuming you follow the rules and they don't change).
This post was edited on 5/27/16 at 8:58 am
Posted on 5/27/16 at 10:17 am to The Seaward
quote:
Where is the best place to open a Roth IRA? How does it differ from a 401k? My company puts in a percentage of my salary and I can match the 401k.
quote:
Main difference is the tax advantage. 401k is deferred on your taxes now, but taxed later when you withdraw. Roth isn't deferred on your taxes now, but is tax free when you withdraw (assuming you follow the rules and they don't change).
While this is true, I would first check to see if the retirement plan through your employer offers a Roth401k.
A Roth401k (after-tax) has the same tax advantages as a Roth IRA and there are no income limitations with a Roth401k, also the contribution limit is 18k annually with a Roth401k. With a Roth IRA it is only 5500 annually.
However, if you do not have the Roth401k option through your retirement plan, then your best bet is to put in the % amount your company will match in a traditional 401k (pre-tax) and then open up a Roth IRA
ETA:
Contribute to ROTH401k first (up to match + contribute whatever you can afford after that).
If not available,
THEN
Trad. 401k to match amount and open Roth IRA, goal should be to max out roth every year asap
Just felt the need to emphasize this because this is what you should do.
This post was edited on 5/27/16 at 12:09 pm
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