Ask the Dollar Diva By Dorothy Rosen • Bankrate.com

SIMPLE Plan or Roth IRA?

Dear Dollar Diva,
I am 31 years old and the sole owner of a Sub S Corporation. My net income is almost $100,000, which I take approximately 40 percent as salary and the balance as Sub S distributions.

My accountant recommended that I start a SIMPLE Plan (savings incentive match plan for employees), which I did, and I'm investing $500 a month in it. Is this a better route than a Roth IRA?

I am married, and my wife makes approximately $30,000. She currently invests 10 percent in a 401(k) plan, even though her employer only matches up to 5 percent.

The Diva appreciates having a smart reader like you with entrepreneurial skills and the vision to plan for the future.

You're investing $6,000 a year in a SIMPLE Plan, which is the maximum allowed for 2000. Your wife, on the other hand, may be shortchanging herself with the 10 percent contribution to her 401(k) plan. She should find out if her plan allows a higher percentage, and if so, go for it. The Diva believes in taking advantage of every tax-deferred opportunity in sight -- not doing so can be detrimental to your future wealth.

Investing in a Roth IRA is not an either/or for you. Unless you had some hefty capital gains or other income you don't mention, it looks like you can do both, even though you have a SIMPLE plan. Here are the adjusted gross income phase-out ranges just in case:

The Roth IRA is not deductible, but it has other compensating features:

• Distributions don't have to begin when you're 70-1/2.

• Contributions are the basis for tax-free, compound earnings into eternity.

• Contributions can be made as long as you have earned income; they don't have to stop at 70-1/2.

• You can withdraw your after-tax contributions tax and penalty free whenever you want to.

• Income limitations are higher than for a traditional IRA.

For more information on the Roth, see the Diva's "What's the difference between a 401(k) and an IRA" and "Time is on your side with a Roth IRA."

You didn't say, but the Diva hopes you are also accumulating savings for emergencies and your non-retirement goals. The first step to wealth accumulation is building up a safety net, so you don't have to go into high-interest debt when you experience those inevitable, unexpected, costly curve balls that life throws our way.

DOROTHY ROSEN has a master's degree in finance, with a specialization in accounting, from the Kellogg Graduate School at Northwestern University in Evanston, Ill. Rosen has more than 15 years of experience in the financial arena, serving in Illinois and Florida as a certified public accountant, financial consultant, expert witness and educator. She is owner of Dorothy Rosen, CPA, a public accounting firm that serves individuals and small businesses.