Continue to invest in Roth IRA or contribute to new 401-k?

[Guest langer]

My company just started a 401-k program and will match 1% of my salary (approx. $1,200). Am I better off contributing new money to this 401-K, or continue to fund my wife's and my Roth IRA. Thanks

[John G]

Just matching 1% ? I have never seen a single 1% match before. Seems kind of small. Double check that percent again.

I will assume that you mean a 1:1 match in the 401k. Since this is a 100% gain, instantly, I recommend you max out on any match.

After you pass that funding point, it is less clear which route is superior. For example, do you like the options in the company plan? On the Roth side, you have essentially an unlimited number of investment vehicles. The company route may be more restricted and more/less attractive (company stock?). You might also consider fees if any. When you put more money into your company plan, you may be leaving out your wife. The Roth route allows some "balance" between his and hers which depending upon your relationship and circumstances may be important. You can fund your Roth on Jan 1, if your company plan is funded a year end you might be losing a year of investment. There are probably other issues...

[John G]

Other issues can include: protection against creditors, option to take a loan (not possible with IRA), dispersement of funds rules/options, option for long term capital gain treatment on 401K company stock under some circumstances, and probably some more....

Some of these may never apply. I would say the top three most important issues are: match, corp investment option, and wifes desire to have funds in her name.

Good luck.