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Retirement Planning/Balancing 401(k) with Roth 401(k)


I'm 24 years old working in my first professional job. My company offers a traditional 401(k) plan where they give an automatic 3% and match an additional 5%, and they also offer a Roth 401(k) with no matching contributions. I definitely want to benefit from the matching contribution by investing at least 5% in the traditional 401(k), but should I then invest the rest of my contribution into a Roth 401(k), or should I put it all in the traditional?

Your employer has made a good offer, and you have responded with the right questions.

Obtaining the employer max is a good strategy. Putting the excess into a Roth 401(k) is wise, so long as you have no need for life insurance.

You might want find out whether the Roth contribution qualifies for the employer match. If so, that would be better than putting in funds on a tax-deferred basis.

If your only option for a Roth 401(k) contribution is in a mutual fund-like plan, and is not eligible for the employer match, I would suggest that you make such contributions outside your employer's program. These could be in a Roth IRA or high 'cash value' life insurance. I feel that building a conservative alternative to your employer's plan will be more satisfying in the long run.

Willard R. Brumbaugh, LUTCF
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(888) 792-2379

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Willard R. Brumbaugh, LUTCF


I have answered many questions regarding 401ks, IRAs and annuities as well as life insurance. I have been counselling against most Qualified Plans since 1994.


Ranked in the top 5 in retirement catagories at most of its last 2 1/2 years. Organizations I belong to: National Association of Insurance and Financial Advisors-California
Inland Empire Estate Planning Council

Life Underwriters Training Council Fellow

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