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Here's a question for the finance experts and enthusiasts out there.
If you had to choose between investing a 401(k) or a Roth IRA, which would you contribute to first? I have some funds in both but I'm putting most of my investing into the IRA at the moment. Once I reach my target in my emergency savings (hopefully by the end of the year), I'll probably add more to the 401(k). I should also add that there's a fair chance I will be switching jobs by 2009 and I will not be fully vested.
I think it also matters what your tax rate is. But most likely I would invest up to the matching point in 401k and then the rest in the roth.
with us, I know we will be at a higher tax bracket when we retire. right now we have 2 kids, middle class, low tax bracket. So I prefer to contribute the max in the roth so I dont have to worry about taxes on that amount at retirement.
Thank you both! I'm not sure what my tax bracket is exactly but it's relatively low at the moment.
Last year was my first with the Roth IRA and contributed the $4,000 max. I was trying to decide whether I would use my recent raise to cover the new $5,000 max or add to my 401(k). I may just decide on the latter now.
Since the employer holds out the amount you contribute to the 401k I would do that first, primarily because then it is out of your hands. Once you have become used to doing without that part of your pay that you never even see, then start putting some money into your Roth as well.
If your employer offers any match you should absolutely take advantage of that. Ultimately, the Roth is the better deal down the road when you retire, but the 401k is better as "forced savings" just to get you into the habit.
Since the employer holds out the amount you contribute to the 401k I would do that first, primarily because then it is out of your hands. Once you have become used to doing without that part of your pay that you never even see, then start putting some money into your Roth as well.
If your employer offers any match you should absolutely take advantage of that. Ultimately, the Roth is the better deal down the road when you retire, but the 401k is better as "forced savings" just to get you into the habit.
Actually I had contributed the max to my 401(k) for several months until I decided that funding my emergency stash was more important and I left in a token deduction. (I turned out to be clairvoyant as my company soon afterward froze their contribution.) But now that I got a bit of a raise, the Roth IRA max is higher, and the company's kicking in funds again, I wasn't sure of which direction to go. Thank you for your advice!
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) But now that I got a bit of a raise, the Roth IRA max is higher, and the company's kicking in funds again, I wasn't sure of which direction to go. Thank you for your advice! 
