Quote Originally Posted by ksniperfox
how much is the tax rate of 401k withdrawals after 59 1/2? how do IRAs work? if i can deposit pretax dollars into an IRA and not have it taxed when i withdraw, that seems better than 401k. but if i take my money that i earn that is already taxed, put it into an IRA, it is not taxed when i withdraw? are there age limits on it? seems like it is taxed, just the opposite way from 401k. are there any benefits to that?

everyone ive spoken to about it suggests investing into stocks, but i really need to look in detail as to what (fund?) contains which stocks and look at their quarterly and yearly reports? i think they have it online, but i never read much into it.

but say i do invest in stocks(i have already, as of january 2007), when and how would i see a return, or if the value of my share has gone up? if it goes up, can i sell/convert that $ into another fund?

as far as debt, i don't do debt. never had any never will, unless its a car i guess. or whenever i get a house. but nothing like a credit card debt.

sorry for all the questions, looking to learn all i can. im asking various sources-here, people i know, etc..+reps have been given to all positive posts. thanks.
The tax rate is based on your income for the year(how much you withdraw that year). If you pull 20k/year you get taxed at the going tax rate for someone who makes that much in a year. If you think you're going to be in a lower tax bracket when you retire, the 401k works better. If you're thinking it'll be higher, the Roth IRA works better since you get taxed now and not when you retire. Given our current gov't financial situation, it's probably safe to say even if you expect to pull the same amt of money in retirement as working, you'll probably get taxed at higher rates in the future.

The traditional IRA works exactly the same as a 401k. No tax until you pull money out (retirement time). The Roth is the one that you pay tax now on and not when you retire.

Since you get a company match on the 401k, it's likely best to put money into the 401k up to the company match and then fund a Roth IRA after that. Then you have money in both untaxed and taxed accounts that you can pull on. The Roth is a great thing to have since you can keep all of the money that accrues over the years. You can pull from it in an emergency but that doesn't mean you shouldn't keep a 3-6 month emergency fund of cash anyway.

As for when you see returns, the accounts move up and down daily. My account swings 1-2k sometimes which hurts to see but the overall goal shouldn't be to move it around too often. Instead you should just be continually contributing money into the account. If some fund does grow really big, you may want to shift some money into other funds to lock in profits but you really don't want to do that more than once or twice a year. Moving stuff around just burns all of your gains on fees and trading costs. My solution has been to redirect my contributions to other funds to rebalance my portfolio rather than selling anything.

I currently put 10% in the 401k (company matches to 4%), max the Roth IRA, and then keep a decent cash reserve and some tax advantaged index funds and a few stocks in my regular trading account.