IRA vs. 401(k): Which is Better for You? | http://www.foxbusiness.com/personal-finance/2012/10/29/ira-vs-401k-w...

Fox News Fox Business uReport Radio Fox News Latino Fox News Insider Login

Search Stocks & Keywords Search

Pension Crisis: The Gathering Storm Trending Firewall ObamaCare Rollout Jobs Report Market Check

Home Video Markets Industries Economy & Policy Investing Technology Personal Finance Business Leaders On Air Small Business

Home & Mortgage Career College Planning Lifestyle & Budget Health Care Retirement Taxes Tools & Calculators Job Search Slideshows

1 of 5 12/16/2013 6:49 IRA vs. 401(k): Which is Better for You? | Fox Business http://www.foxbusiness.com/personal-finance/2012/10/29/ira-vs-401k-w...

FOLLOW FOX BUSINESS

By Donna Fuscaldo / Published October 29, 2012 / FOXBusiness Get Our Free Newsletter Enter Email Address

Like 126k Follow @foxbusiness

Print When it comes to retirement planning, you have choices when it comes to picking what savings vehicle best fits your lifestyle. While Email most people will simply go with the 401(k) plan offered by their Share employer, there are other options like the Roth IRA. Like 25 When deciding which tool will house your nest egg, experts advise Tweet 26 taking into consideration your discipline, income and tax goals. SSharehare 8

With a company-sponsored 401(k) plan, employees can contribute pre-tax dollars from each pay check, which lowers their taxable RELATED STORIES income at the end of the year. In some cases the employer will Roth IRA vs. 401(k) for match a portion of the contributions, effectively giving the 20-Something Saver employee free money. When it comes time to cash out of the plan, Best Ways to Get Into RECOMMENDED VIDEOS Investing in Your 20s when you reach 59 ½, you would have to pay taxes on the Bo Dietl on U.S. foreign affairs Ins and Outs of IRA distributions. Accounts

An Individual Retirement Arrangement (Roth IRA) is another retirement savings tool. The money you put this account can’t be Over-the-counter written off on taxes, but money grows tax free and you don’t pay birth control? taxes on the money when you take it out as long as you are over 59 ½ and have had the Roth IRA open for at least five years.

Which is Better for You? MORE FROM FOX BUSINESS Investing in the According to financial experts, the 401(k) is attractive to many Right Mutual Funds people because the money is automatically taken out of their pay for Me check—there’s no effort to save. “The onus is on the employer,” says Tisa Silver-Canady, assistant director at the office of Financial Education and Wellness at the University of Maryland. “It makes This Little-Known Credit Card Perk sense for people that don’t want to worry about doing it Can Save You Big themselves.”

The amount you can contribute to a 401(k) each year is higher How to Cut

2 of 5 12/16/2013 6:49 IRA vs. 401(k): Which is Better for You? | Fox Business http://www.foxbusiness.com/personal-finance/2012/10/29/ira-vs-401k-w...

than a Roth IRA at $17,000 for people under 50 and $22,500 for Home-Buying Costs those over 50.

The possibility of an employer match with a 401(k) also makes it

attractive. “It might be that the employer matches the first 6% at 50 Stock Futures Point cents on every dollar and that’s an immediate 50% return,” says to Higher Open David Ning, owner and operator of personal finance blog Moneyning.com, noting that since the money is taken out before you get the pay check it helps people sock away money for FROM AROUND THE WEB retirement. “Studies show it really works. If you don’t see it you Letting Go of don’t miss it,” he says. Keeping Up Prudential There are also downsides to 401(k) plans. The plan choices can be limited. For instance, your employer may only give you two or three

fund choices to invest in, limiting your options and preventing the What's this? highest return on your money. In addition, the fees associated with Investing › the plans could lower your investment dollars.

Before deciding on a 401(k)plan, Ning suggests checking for a company matching program, assessing the plan options and the fees. Midday Market Report: 12/16/13

In the case of the Roth IRA, Adam Bergman, a tax attorney with the Boeing Raises Dividend by 50% IRA Financial Group, says the biggest advantage of this Avago To Buy Storage Chipmaker LSI For $6.6B investment form is that your money grows tax free. With income tax rates expected to increase in the future, Bergman says this could BANK RATES be “potentially tax efficient.” Mortgage Home Equity Autos CD Rates

Loan Type Graph Rate +/- Last In addition to a Roth IRA giving you a tax benefit when you cash out, its self-directed nature puts you in the driver’s seat when it 30 Y Fixed 4.49% 4.4

comes to choosing the funds. However, there are limits to have 15 Y Fixed 3.52% 3.4 much you can invest each year: People under 50 can only invest 30 Y Fixed 4.57% 4.5 $5,000 while people over 50 can invest $6,000. Jumbo

5/1 ARM 3.46% 3.4 If you make more than $183,000 jointly you won’t be eligible to 5/1 Jumbo invest in a traditional Roth IRA. Bergman notes that since 2011 2.94% 2.9 ARM there are no income restrictions for a Roth conversion, which Find Personalized Rates means you can make a traditional IRA contribution a nd then Enter Zip Co Search convert the funds to a Roth IRA, which would be subject to tax.

Sponsored Topics Not to mention that since the money invested isn’t pretax, it doesn’t lower your taxable income. If your Roth IRA lost all its money 1 Retirement Calculator because of a bad investment, you would have nothing to show for 2 Best Annuity Funds it, explains Bergman, but if you chose a 401k() and lost all your 3 High Yield Savings Account money, you would have at least lowered your taxable income. 4 Stocks to Buy Now Although deciding whether to go with a 401(k) or Roth IRA is a 5 College Rankings personal decision, there’s nothing stopping you from investing with both. “In a perfect world you would do both,” says Silver. You 6 Health Insurance Comparison would have a 401(k) from your job and something you were in control of with an IRA.”

3 of 5 12/16/2013 6:49 IRA vs. 401(k): Which is Better for You? | Fox Business http://www.foxbusiness.com/personal-finance/2012/10/29/ira-vs-401k-w...

FROM AROUND THE WEB MORE FROM FOX BUSINESS

Letting Go of Keeping Up (Bring Your Challenges) U.S. Supreme Court Won't Hear Online Sales Tax Case Top Housing Expert Forecasts Huge Appreciation in Should you buy a mortgage at Costco? Housing Market (Merrill Lynch: Wealth Management) Best and Worst Things to Buy in December 4 Stupid Investment Mistakes Nearly Everyone Makes 48-Year-old has Just $6K for Retirement (etrade.com) 7 Original Answers for Cliché Interview Questions A Reliable Source of Retirement Income (YouTube) Bullying: Deal With It Top 3 Popular Retirement Account Types: Which One Is Right for You? (etrade.com) Your 401(k) isn't growing as fast as it should - here's why (Mint.com)

[What's This?]

SHARE THIS ARTICLE FOX BUSINESS VIDEO

25 0 26 S

Like Tweet S

Bringing A Christmas Story to the stage as a musical

From around the Web ADVERTISEMENT

Jaw-Dropping Learn Languages Fast The Next Big Stock? 7 Biblical Money Truths Top-Droppers

Weird Rule in New 8% Annuity Return Jersey: 15 Most Beautiful Secret Obamacare Collapse

MORE FROM

TOP STORIES POPULAR VIDEOS

Markets Is Leasing a Car Bulls Charge Wall Street on Strong Right for You? Data

Investing Rep. Rangel: No Such Thing as a Boeing Raises Dividend by 50% Limited War Herbalife International of America, Inc. Investing Herbalife Soars After Re-Audit The Biggest Key Nasdaq System Still on Windows Threat to the Finds No Material Changes 2003? One Puff and Pass Closer to Legal September Stock Market Shares of nutrition company Herbalife Industries MPP director of federal policies Daniel Riffle on soared almost 10% after it said a Reports: Verizon Near Deal for Intel's the latest on marijuana legalization. Hole-in-One re-audit following the KPMG scandal TV Service Insurance? required no material changes.

ALSO ON THE WEB

4 of 5 12/16/2013 6:49 IRA vs. 401(k): Which is Better for You? | Fox Business http://www.foxbusiness.com/personal-finance/2012/10/29/ira-vs-401k-w...

Audio: Newscast: Wall Street opens week with a win Our 10 Best Secret Santa Gifts for 2013

After Hours: Boeing up after hours after dividend hike Gold Advances as U.S. Dollar Retreats

The Proactive Fund Investor, with Bill Donoghue: 3 market Kmart Gives ‘Ship My Pants’ Video a Holiday Twist trends you can’t ignore 4 Reasons Twitter’s Stock Has Gone Crazy Judge Rakoff asks: Why have no Wall Street executives been prosecuted for their role in the financial crisis? Graze.com’s Healthy Snack Service Comes to U.S.

Spotlight on economy: Data may show quiet inflation, optimistic home builders

After Market: Exxon, IBM Power a Monday Stock Surge

How Much Extra Would You Pay for 'Made in the USA'?

What to Watch on Wall Street This Week: Used Cars and Office Furniture

Market Minute: All Eyes on the Fed this Week with Taper Talk in the Air

After Market: Stocks Stabilize, and Microsoft's CEO Short List Gets Shorter

SECTIONS BROWSE SHOWS ABOUT FOLLOW

Home Trending After the Bell About Fox Business Facebook Video Stock Quotes Cavuto Channel Finder Twitter Markets Video Advertise With Us Google+ Industries Anchors & Reporters Jobs at Fox Business LinkedIn Economy & Policy TV Show Schedule Internships RSS Investing Tools Markets Now Terms of Use Newsletters Technology Topics Money with Melissa Francis Privacy Statement Personal Finance Mobile Stossel Ad Choices Business Leaders Apps & Downloads Varney & Company FAQ On Air Alerts The Willis Report Media Relations Small Business The Independents

Quotes delayed at least 15 minutes. Real-time quotes provided by BATS Exchange. Market Data provided by Interactive Data (Terms & Conditions). Powered and Implemented by Interactive Data Managed Solutions. Company fundamental data provided by Morningstar. Earnings estimates data provided by Zacks. Mutual fund and ETF data provided by Lipper. Economic data provided by Econoday. Dow Jones & Company Terms & Conditions.

This material may not be published, broadcast, rewritten, or redistributed. ©2013 FOX News Network, LLC. All rights reserved.

5 of 5 12/16/2013 6:49