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Aug 13, 2008 11:47 am US/Pacific

Savings Money: IRA Vs. Roth IRA

QUESTION:  I'm 31 and want to get my savings in order. I'm putting money into my 401(k) at the level that gets me the maximum match from my company. But should I invest in an IRA as well?

ANSWER: TI think increasing your retirement saving is a great idea.  However, instead of a traditional IRA, I would suggest opening a Roth IRA.  The difference between the two is as follows:

You receive a tax deduction for making a contribution to an IRA, with taxes being applied to any withdrawals taken.  Contributions to a Roth IRA are not deductible, however all

distributions from a Roth IRA after age 59 ½ are tax free.  Both deductible traditional IRAs and Roth IRAs are subject to earnings limits.  If you are unable to participate due to the earnings limit, I would increase the amount you are contributing to the 401(k).
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Money Matters is provided by:

David Schauer, CFA, MSFA, CFP®
Financial Planner
Hanson McClain
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