03-14-2018, 10:20 PM
Gareth wrote:
[quote=space-time]
[quote=pdq]
The only thing that you might be missing there (and I may be wrong - not an accountant) is that that money in an IRA would earn dividends and such tax free.
But I could also put more money in 401(k) and the outcome would be the same, right?
A traditional IRA would essentially work the same as your 401k.
A Roth IRA has tax free withdrawals, but you put in post-tax money. There are also income limits for a Roth IRA (i.e. somewhere after 100k in income for a single person, you get partial contribution limits and at a certain income point, you are no longer eligible to contribute anything to a Roth IRA). My dad is a huge fan of Roth's since he thinks any tax free income is a loop hole of some sort. Of course, whether or not it is better for you is a complicated question involving how much you make now vs. how much you think a Roth would grow, etc, etc.
My accountant is likewise a proponent of putting as much into a Roth as I can (stated as I'm 39yo and have a few years yet to work).