401k versus IRA

[Logan44551]

Hey guys just looking for opinions on which is better 401k or an IRA. The 401k is theough the union and not employer matched. I'm going to be 36 this year and starting to think about my future a little more seriously. I think i will probably be putting 150-200 a week into it. I like the IRA becuase i can chose what i invest the money in with more flexibility the 401k seems good too as you can pull money out for certain things without having a tax penalty. Thoughts or advice welcome, thanks!

 

[ickyrica]

Your ability to move financially is very restricted with a 401k depending on certain variables. This is a long term saving plan with a principal idea of keeping money in the market rather than having the ability to move it out of the account. You will pay applicable taxes and penalties if you withdraw cash prior to retirement.

An IRA account has similar restrictions in that you can not withdraw funds without a penalty and tax payments.

The main reason these have the restrictions is because you put money into them before taxes were paid. There are other reasons but that is the main one.

A Roth IRA is a retirement account you can have that has your money in it after you pay taxes. This enables you to invest your money without having to pay penalties and taxes, depending on certain conditions.

For you at your age, provided you do not have an existing retirement structure under way, and without a match from your employer, should forgo the 401k and get either a IRA or a Roth IRA.

The choice now is are you able to put cash away and not need it. Can you save money for retirement without at some point needing that money in hand. If you can save and not need the cash get an IRA. If you anticipate pulling cash out for some reason in a decade or two get a Roth IRA.

IMO, if you start a retirement account you should never touch it. The entire principal behind a retirement account is compounded interest. If you don't have cash in an account this is a minimal return. If you are good and don't touch that cash, after a decade or two you'll be looking at a decent start for your golden years.

I am in no way a financial advisor, nor do I play one on tv. Please research these types of accounts and if you are serious about saving I would consult a professional. At 150 - 200 a week you will make up ground pretty quickly.

 

[Logan44551]

Your ability to move financially is very restricted with a 401k depending on certain variables. This is a long term saving plan with a principal idea of keeping money in the market rather than having the ability to move it out of the account. You will pay applicable taxes and penalties if you withdraw cash prior to retirement.

An IRA account has similar restrictions in that you can not withdraw funds without a penalty and tax payments.

The main reason these have the restrictions is because you put money into them before taxes were paid. There are other reasons but that is the main one.

A Roth IRA is a retirement account you can have that has your money in it after you pay taxes. This enables you to invest your money without having to pay penalties and taxes, depending on certain conditions.

For you at your age, provided you do not have an existing retirement structure under way, and without a match from your employer, should forgo the 401k and get either a IRA or a Roth IRA.

The choice now is are you able to put cash away and not need it. Can you save money for retirement without at some point needing that money in hand. If you can save and not need the cash get an IRA. If you anticipate pulling cash out for some reason in a decade or two get a Roth IRA.

IMO, if you start a retirement account you should never touch it. The entire principal behind a retirement account is compounded interest. If you don't have cash in an account this is a minimal return. If you are good and don't touch that cash, after a decade or two you'll be looking at a decent start for your golden years.

I am in no way a financial advisor, nor do I play one on tv. Please research these types of accounts and if you are serious about saving I would consult a professional. At 150 - 200 a week you will make up ground pretty quickly.

Awesome thank you! I have a pension and a annuity account as well, just want to start saving more. I hope to never have to pull any of it out, tga ks for your thoughts

 

[HIGHRISK]

I know this is late as fuck. I've never been in this section before. But my opinion is BOTH. Do your 10-15% 401k at work and open up your own Roth IRA. Max on the Roth is $5,500 a year and when you take it out you only pay taxes on the money you've put in not the growth. You can easily have a couple million dollars by retirement doing these 2 things.

 

[ickyrica]

This IS a situation where more is better. Good advice @HIGHRISK

 

[Logan44551]

So a little update. I started contributing to the 401k in august. I think i socked away 6000 since then. I have a IRA account as well, i haven't put anything in there this year as if yet, i may stick half of my vacation check in there when it comes. As well as shoot for 50 dollars a week moving forward.

 

[ickyrica]

If I could offer you some advice it would be to not touch your money once it's in those accounts. Saving is what the game is and removing money defeats the purpose. Welcome to the club and I hope you end up where you need to be when the road your traveling decides to cash out!!

 

[Logan44551]

If I could offer you some advice it would be to not touch your money once it's in those accounts. Saving is what the game is and removing money defeats the purpose. Welcome to the club and I hope you end up where you need to be when the road your traveling decides to cash out!!

Totally the plan! I shouldn't have any reason to pull it out, im already in a home.

 

[HIGHRISK]

Ever heard of Dave Ramsey? If not do yourself a favor and download his app and listen to his daily shows! It's changed my life tremendously.

@gr8whitetrukker im sure would agree also?

 

[Logan44551]

Ever heard of Dave Ramsey? If not do yourself a favor and download his app and listen to his daily shows! It's changed my life tremendously.

@gr8whitetrukker im sure would agree also?

I seen you guys talking about him awhile ago, and i watched something of his on youtube afterwards. What's the name of the app?

 

[gr8whitetrukker]

Ever heard of Dave Ramsey? If not do yourself a favor and download his app and listen to his daily shows! It's changed my life tremendously.

@gr8whitetrukker im sure would agree also?

I used to catch Dave when my ass's life was going down the toilet in the middle of a harsh chapter7. He used to be on fox at night and on the radio during the day. Keeps you awake and thinking if nothing else. I learned alot from him and my life has never been better!!!

 

[Dr JIM]

In general from one primary difference is how monies and/or earning are TAXED

In a 401k the monies are contributed in a PRE-TAX manner
but are TAXED upon withdrawal

While an IRA the monies are taxed before a contribution is made but NO TAX is levied upon withdrawal.

I’d suggest you try the web for a more comprehensive comparisons.

 

[flenser]

In general from one primary difference is how monies and/or earning are TAXED

In a 401k the monies are contributed in a PRE-TAX manner
but are TAXED upon withdrawal

While an IRA the monies are taxed before a contribution is made but NO TAX is levied upon withdrawal.

I’d suggest you try the web for a more comprehensive comparisons.

I think you are referring to a Roth IRA which is taxed up front and not taxed upon withdrawal. A normal IRA is taxed upon withdrawal, but deducted from the contributing year's taxable income (depending on limits due to income). A ROTH IRA isn't deducted from the contributing year's taxable income, but isn't taxed on withdrawal.

Incidentally, I assume you make too much to legally contribute to a Roth IRA. I learned recently about a "back door" Roth IRA where you contribute to a normal IRA and immediately roll it into a Roth. New tax laws may impact this, but so far I haven't gotten a definitive answer from my (employer's) accountant.

On the IRA vs. 401K if the 401K has no matching funds, go with the IRA. It's otherwise the same thing except you get to pick the IRA provider, and normally a 401k ends up rolled into an IRA when you leave the company anyway. In fact, go with the Roth IRA if you can. After capital gains, the saving in taxes on withdrawal are significant compared to a normal IRA - at least until Congress decides to screw everyone with new laws.

 

[Dr JIM]

Congress screw “the American people” never.

Every time I hear a poliiican say “the American people” I know taxation, fines or fees are headed our way.

These clowns live such a sheltered life they have no idea what it’s like to run a business, maintain a budget or raise a family in the “real world”.

 

[HIGHRISK]

Congress screw “the American people” never.

Every time I hear a poliiican say “the American people” I know taxation, fines or fees are headed our way.

These clowns live such a sheltered life they have no idea what it’s like to run a business, maintain a budget or raise a family in the “real world”.

Isn't that the damn truth! My account gave me my estimated taxes owed for last year. I damn near passed out. I said what the hell. She says you didn't spend any money or buy anything. I said I'm trying to run a debt free company. She said that's great but you'll pay for it! So I can go buy and finance a bunch of shit to lower my tax bill. Or stay debt free and get penalized for it? Seems business owners like me should get a tax break for operating debt free so there's no chance of me being a burden on the government if I have to file bankruptcy.

 

[Dr JIM]

An annuity account as well,

I’d review the fee structure of your annuity NOW while you can
bc in general annuities tend to have a low rate of return esp when they are attached to a “whole life” insurance policy.

 

[Dr JIM]

Ever heard of Dave Ramsey? If not do yourself a favor and download his app and listen to his daily shows! It's changed my life tremendously.

Hes also a great “motivator” as his advice is structured to help everyday folk manage their finances.

 

[Logan44551]

I’d review the fee structure of your annuity NOW while you can
bc in general annuities tend to have a low rate of return esp when they are attached to a “whole life” insurance policy.

I'm not sure about the fee structure, it is through the carpenters union. So every hour worked a certain amount is put into account. Then when you retire you can either get payments out of it monthly, or can do a lump sum withdrawal.

 

[Dr JIM]

I'm not sure about the fee structure, it is through the carpenters union. So every hour worked a certain amount is put into account. Then when you retire you can either get payments out of it monthly, or can do a lump sum withdrawal.

IDK is an “annuity” would apply in this instance bc if the employer is “matching” your contributions in some manner it would better approximate a 401K or perhaps a 403B type plan.

To that end IF matching funds are involved I’d strongly suggest you MAXIMIZE that component before searching for additional
means of saving for retirement.

Jim

 

[Dr JIM]

Just know chances are no one will care about YOUR money more than YOU!