No employer 401(k) match — Roth IRA first, or max the 401(k) anyway?
New job, no 401(k) match at all. I can save about $500/month. Option A: max a Roth IRA first ($7,000/yr limit), then put the rest in the 401(k). Option B: skip the Roth, push everything into the 401(k) for the bigger tax deduction now. I'm in the 22% bracket, early 30s. The Roth's tax-free growth is appealing but the upfront deduction isn't nothing. Which order actually wins over 20+ years, and why?
1 answer
- Roth IRA
Roth, no contest, when there's no match. Without free employer money the 401(k) is just a tax-deferral box with worse fund choices and a 10% penalty if you touch it early. The Roth lets you withdraw your CONTRIBUTIONS anytime — no tax, no penalty — because you already paid tax on them. That's straight from the IRS rules, not my opinion. So your Roth doubles as a backup emergency fund while it grows tax-free. Fund the Roth to the $7,000 limit first, then put whatever's left in the 401(k).