Q. My company doesn't provide a match to 401(K) saving, and I don't have enough money to fund both accounts to maximum allowed amount, which account should I fund first?
A. If your company doesn't provide a match to 401(K) contribution, you should focus on maxing out on your Roth IRA first.
And make sure you invest your Roth IRA money in no-load low cost mutual funds or ETFs. Don't invest in funds with annual expense exceeding 0.5%.
Many people don't realize how significant the small annual expense could eat into their retirement money, let's see the following hypothetical example:
Example
You invest $5,500 per year in Roth IRA with annual return of 6%.
Scenario 1. Your annual expense is 0.1%
In 30 years, you will have $452,450, free of tax!
Scenario 2. Your annual expense is 0.5%
In 30 years, you will have $420,307, free of tax, this is $32,143, or 7% less than scenario 1!
Paying attention to fees is a good way to make more money in the long term.
A. If your company doesn't provide a match to 401(K) contribution, you should focus on maxing out on your Roth IRA first.
And make sure you invest your Roth IRA money in no-load low cost mutual funds or ETFs. Don't invest in funds with annual expense exceeding 0.5%.
Many people don't realize how significant the small annual expense could eat into their retirement money, let's see the following hypothetical example:
Example
You invest $5,500 per year in Roth IRA with annual return of 6%.
Scenario 1. Your annual expense is 0.1%
In 30 years, you will have $452,450, free of tax!
Scenario 2. Your annual expense is 0.5%
In 30 years, you will have $420,307, free of tax, this is $32,143, or 7% less than scenario 1!
Paying attention to fees is a good way to make more money in the long term.
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