Posted on February 21, 2010.
Do I get a 401k / Roth IRA and / or money market instruments to stimulate my gains on financial investments? I have a retirement plan to be an employee of the city, 457 deferred compensation by ING. I have in savings and stock parts. Do I still need a 401k / Roth IRA and / or money market to stimulate investment to gain?
a 401k is not an option for you. A Roth. Also a money market.
The large advantgae the Roth is that any money earned in this account is tax free at retirement. In your marginal rate in retirement may mean an extra 15% to 28% for you at this time. And if you're young enough and save $ 4,000 per year in your Roth, you may be looking at an annual income of $ 200,000 per year in retirement - tax free.
A money market account is not really an investment. This is a safety net for unexpected expenses that may jump on you. Everyone should have at least $ 5,000 in my opinion, just in case. $ 10,000 would be even better.
Your deferred compensation plan 457 is comparable 401k plan offered by your employer. So you do not have the option 401k.
Now depending on your income, age, marital status, you can open IRAs and invest the money.
If you have money just sitting there to win, then you increase your capital gain by the opening of IRAs or CDs or money market or opening a brokerage account and invest in common stocks and mutual funds / ETFs.
Good luck!
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This is a very complex issue ...
1. Most people use a 401K because they work for companies that are set up for them. I know where I work, my company will pay a dollar for every dollar I put in the matching 401K up to 5 percent of my total salary. This is obvious because it's like free money, even though I can not touch it until retirement. Another good thing is that I'm making money out of my income before tax, it is not taxable and reduces later, my taxable income at the end of the year.
2. A Roth IRA is good because you make money today and can withdraw it tax free at retirement. However you can bring your own cash (which has already been taxed), so if your tax rate will be lower in your retirement years than today, you might not come as far as you want . However, the growth of the IRA over the years generally outweigh this easily.
3. The general rule is to take 120 and subtract your age and it is the percentage of your retirement fund should be in stocks, the rest should be in bonds and money market. And make sure that no more than 10 percent of your shareholding in a company falls ... just ask the people who relied on Enron for their retirement.
Good luck
