Solutions 4 Financial Independence: 05/30/17

BRIDGEPORT, W.Va (WDTV) - Question: "I am contributing to a Roth IRA, my employer is now starting a 401(k) but does not plan to match. Should I switch to the 401(k) plan?"

Answer: (John Halterman, Beacon Wealth Management) "The one thing I don't like is you're not getting any free money from your employer. So let's compare some of the things I think you should be looking at and see what the best thing is for you.

"The first thing I'll tell you is look at contribution. In either plan the big thing is how much you want to put away. In the Roth you're only allowed to put up to $6,000 whereas in the 401(k) you're allowed to put up to $18,000, assuming you're under the age of 50. If you're over the age of 50 then you can put more. If you're looking to put more money than $6,000 then you definitely have to look somewhere else.

"The next thing you have to look at is how it's taxed. From a a Roth IRA standpoint the money goes in after tax, grows taxed deferred, but then in the end it's 100 percent tax free. The 401(k) assuming a pre-tax option, you get a tax deduction, money grows tax deferred, and then later down the road it is taxable to you.

"The next thing you got to look at is the contribution match, which of course in this case you get no free money, so there's no advantage from that standpoint. And then the last thing is your investment options. You know how you're investing the money. If in your Roth IRA, you probably have more options than in your 401(k) because in your 401(k) it's always going to be limited to what your employer provides you.

"So depending on what you're wanting to accomplish, depending on how much you're going to put away, and depending upon where it's going to be managed is what you got to look at. If you're under those amounts then you may want to consider just continue doing what you're doing mainly because you're not getting any free money."