Expert: Paul Henneman - 6/22/2005

Question
Today we are meeting with reps for our new 401K program and I was wondering, in your opinion is it better to get into a 401K with my compnay or something like a ROTH with my bank/credit union?

Answer
Michelle,
   Thank you for your question! Yes, a 401k is generally an excellent way to invest. It can depend upon what type of investments they offer through your specific 401k plan, but even if they are not that great the tax benefits are extraordinary. You should invest through your 401k plan.
   A ROTH is also a very good investment. The problem is that the maximum amount that you can invest in a ROTH is very limited, a few thousand a year. If you can invest more than than, a 401k plan will be required. You can generally invest up to 15% of your income to the 401k, and many employers match your investment up to perhaps 3 or 4%. This is like doubling your investment, and with the tax benefits, make it truly something you should not pass on.
   If your employer does not match funds, then a ROTH and 401k are about equivalent in the long run. If you plan to invest more than what is the maximium amount in a ROTH each year, the 401k would be better.
   I hope this helps! Please do not hesitate to follow up with me if i can be of any further service! Perhaps after your meeting you can forward some more specifics on what they are offering through the 401k plan.

Sincerely,
Paul Henneman
President
ValuEngine, Inc.
www.ValuEngine.com
www.VEInstitutional.com
www.VEReports.com