Understanding the Basics

A New Option to the 401(k)

Before the introduction of the Roth IRA, it was fairly easy and straightforward to decide where to save money for retirement. If you had access to a 401(k) plan, it was always most beneficial to save the maximum pretax amount. After-tax contributions to a 401(k) plan were recommended if you had more money to save and did not qualify to make a deductible IRA contribution. These strategies were suggested regardless of whether you received a company matching contribution.

Now with the Roth IRA and the current IRA deductibility rules, the decision is not so cut-and-dry. This section will focus on saving for retirement in a 401(k) plan. However, as you explore this section, you should evaluate the other options available to you in saving for retirement and compare them to saving in your company's 401(k) plan.

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