Saturday, December 17, 2011

I'm torn on what percentage to contribute to my 401(k), versus an IRA and/or Roth IRA. Any suggestions?

Hi. I'm torn on what percentage to contribute to my 401(k), versus an IRA and/or a Roth IRA. Currently, I make about $80,000 per year. I'm 41, single, have no children, no home (I rent)--and no plans to buy a home, no debt or other big expenses--very simply life. My take home is about $3700 per month and my monthly expenses are about $2400 per month (East Coast). I contribute 10% to my 401(k), and my company matches 5%. My 401(k) balance is around $80,000. I also have an IRA (rollover from an old job)--it has about $11,000 in it. I'm considering opening a Roth IRA since I plan on working 20 more years, and the tax-free withdrawals when that time comes seem attractive, although I don't plan on being in a higher tax bracket once I retire (who knows, but not likely). So, I'm just torn on whether I should be bumping up and maxing out my 401(k)--to like 15% or more. Or, whether I should keep it at 10% (or even lower it) and focus on putting some/more money into a Roth IRA. Part of the torn feeling with the 401(k) is that it currently reduces my taxable income--which I always thought was supposed to be a good thing to try and do. Does anyone have any thoughts on this?

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