F I SCAL FI TN ESS
MICHAEL J. DONNELLAN King Financial, Inc.
WHERE SHOULD YOU CONTRIBUTE? 401(k) vs. Roth IRA
Here is a question I have been asked many times in the past couple years… “I contribute 10% to my 401(k) and my employer matches the first 4%. I also contribute to a Roth IRA. Should I just contribute to one or the other?” 401(k)s and Roth IRAs each offer something worthwhile, but slightly different and having both in your retirement-planning might be better than having just one. Among the many advantages 401(k)s offer is that they make saving for retirement easy. The money comes right out of your paycheck. You also get an immediate tax break in that the money you contribute isn’t taxed until you withdraw it, preferably during retirement. Most employers match funds, perhaps the first 4% of what you contribute. Finally, 401(k)s have relatively high contribution limits. Federal law allows you
to contribute up to $18,500 in 2018, plus up to an additional $6,000 if you’re 50 or older. So a 401(k) clearly should be a cornerstone of your retirement planning. On the other hand, a Roth IRA has some great features too. You don’t get a tax break upfront since you’re investing aftertax dollars, but you do get one at the end. You can withdraw your contributions and earnings tax-free provided you meet the withdrawal requirements. continued on page 17
14 | Official Publication of The Ohio Landscape Association