Do I need both?

[Guest sadieelvis]

I am 27 years old and invested in a 401k plan at work, do I need an IRA or am I okay with a 401k for retirement needs?

[Tom Poje]

very good question, and of course easilt debatable.

since you are in a plan, that implies you can't make a deductible IRA (or at least you would be limited on the amount of deductible IRA that you could make)

so I would assume you are talking Roth IRA.

I guess you could 'run' the numbers on the enclosed spreadsheet and see if the results provide enough for retirement. (I picked up the spreadsheet years ago from some posting somewhere) it is easy enough to use - just plug in comp, and deferral rate and see what you will have in 30 or 40 years.

personally, if you can put some extra away into an IRA at this time, even for a few years, I am of the opinion that is the way to go. If you have a bunch of credit card debt, then I'd say its better to pay off the high interest - you will never earn that on your money.

[Lori Friedman]

Usually, compensation and earnings increase as a career progresses. At age 27, you're probably earning much less now than you can expect to be earning in 10 or 20 years, when you'll have an extensive professional background and very marketable job skills.

You can make a contribution to a Roth IRA if your modified adjusted gross income (MAGI) doesn't exceed certain levels. For a single taxpayer, the annual Roth IRA contribution phases out between $95,000 - $110,000 MAGI.

This can be a very compelling reason to contribute to a Roth IRA now, while you're still eligible, rather than waiting until you're older. By the time you're otherwise ready to contribute, your income levels could prevent you from doing so.

[Guest planman]

It's often recommended that you should first contribute enough to get the maximum matching contribution in your 401(k) plan. Next contribute to a Roth IRA. Then if you still want to save more, increase what you are contributing to your 401(k). You really should make sure you get the matching contributions. I expect there will be increased dialogue pushing Roth IRAs. Contributing after tax dollars to a Roth now provides tax free earnings later. Tax rates are generally favorable now compared to previous decades. With all the budget issues, you would expect that to put pressure on taxes. If you believe tax rates will go up, it makes sense to pay taxes now on dollars for Roth contributions vs. paying taxes later on 401(k) balances.