Retirement Money In A Roth IRA First?
Greg has got 15% going into retirement, but Dave thinks a better distribution of that is a good idea.
ANSWER: When you retire, you’re required to start systematically cashing out your retirement when you’re 70 years old. If you continue saving as you are now, you’ll be in a higher tax bracket when you retire than you are right now. For this reason, I would save in the Roth IRA first.
Given the same amount going in, the Roth – fully funded at $3,000 a year – from age 25 to 65 will yield $3 million. If you put the exact same amount into your 401k at work, you’ll be taxed as you pull money out. The Roth is tax-free.
Start with the Roth IRA. Then if you want to do more than $250 a month into retirement, put some into your 401k.