Editor’s note: This is a transcript of the audio file.
Investing for retirement is never simple or predictable. And if you have more than one investment option, like a 401(k) and an IRA, you might be confused as to which one you should fund first. I’m Kristin Arnold with your Bankrate.com Personal Finance Minute.
There’s no one-size-fits-all answer … but Greg McBride, senior financial analyst with Bankrate.com says there is a pecking order in deciding how to fund your accounts.
“Begin by contributing enough to your 401k to maximize any employer match…that’s free money so there’s no sense in passing that up. Secondly, if you’re eligible to contribute to a Roth IRA, and that’s based on income, then focus on contributing the maximum to that account. If you get to the point where you still have money to invest after having done both of those things then you can increase contributions to your 401k, which carries a much higher maximum than you see on an IRA.”
You should always research your investment options before investing… to do that, just log onto Bankrate.com. I’m Kristin Arnold.