View Single Post
Old 07-18-2007, 10:47 AM
  #3  
LAfrequentflyer
Gets Weekends Off
 
LAfrequentflyer's Avatar
 
Joined APC: Jul 2005
Posts: 2,242
Default

Money you pull from a 401(k) and traditional IRA will be taxed as ordinary income, so if you anticipate you will be in a lower tax bracket than you are today, this is to your advantage.

Money you pull from a Roth IRA will be tax-free, which is to your advantage if you anticipate being in a higher tax bracket than you are today or if you anticipate lawmakers will raise income tax rates by the time you retire.

If you have a 401(k) at work and you qualify for a Roth IRA, one of the best ways to maximize your savings tax-wise is first to put enough in your 401(k) to get the full match and then contribute up to the limit in your Roth IRA.

If you can save even more after doing both of those things, you can put the rest of the money you've earmarked for retirement savings into your 401(k) up to the maximum allowed.
LAfrequentflyer is offline