Should i reduce my 401k contribution from 7% to 5% and invest the rest in a roth ira?

Question

my employer's 401k plan:

For every $1.00 that you contribute, up to 3 percent of your pay, the Company will make a matching contribution of

100 percent. Additionally, the Company will match 50 percent of the next 2 percent of compensation deferred as a

salary reduction contribution. A participant is always 100 percent vested in the matching contributions made on his/her

behalf.

Contributions are matched each pay period. Any contribution you make in excess of 5 percent of your pay, or any

rollover contributions you make, are not eligible for Company Matching Contributions.

Answer 1

I'd say that is an EXCELLENT idea. You have no idea how annoyingly painful it is to see 15% or 20% being deducted from any 401 or traditional IRA withdrawal for the IRS !!

Get that ROTH started and get some aggressive funds in there... 'cause no matter how much it gains...IT'S ALL YOURS. (...and no matter how big your " heart" is, after 35/40 years you sure get tired of people living off your earnings... especially politicians...using your money to buy votes by giving it away )

Answer 2

It would make sense. It depends on your tax bracket and the expected tax bracket during your retirement. However, having ROTH IRA you will be protected against any tax laws changes and you will be able to withdraw your money tax free when you retire. Good Luck:)