Roth IRA vs. 401k

A lot of people do not understand the basics of the 401k. Here is the short version of the differences between a Roth IRA and a 401k.

Roth IRA  Individual Retirement Account (Single contributor under the age of 55)                                                           

Maximum $5,000 contribution per year. 

After-tax contributions (net pay)

Withdraw tax free at the age of 59 1/2.

Can not have gross earnings greater than $150,000 per year.

10% penalty for withdrawing money out early (before age 59 1/2)

    main exceptions: higher education cost

                             medical expenses

                             downpayment on first home. 

               

401k

Contribute before-tax contributions (gross pay)

Can contribute up to $16,500 per year.

Employer usually matches between 3-6% per year

Need to know: You can invest in a Roth IRA as well as a 401k.

Advantages

Roth IRA: Funds grow tax free.

                                            

401k: Employer contributes based on a percentage of your salary.

         Can contribute up to $16,500 before tax earnings per year. 

Disadvantages

Roth IRA: 10% penalty for early withdrawal 

                 Can only contribute $5,000 per year ($10,000 per married couple) 

                 

401k: When withdrawing, you are taxed at your current tax rate. So, the more money you make, the higher you are taxed. 

          

Retirement can be a little tricky if you do not know what you are looking at, but hopefully this answers some questions you may have had. 

So what affects the market?

There are many things that are going to affect the market such as analyst opinions, economy, company news, and mergers and acquisitions. As there are many other reasons prices fluctuate up and down, but for today, we will focus on some basics to get you started on the right foot.

Lets discuss three easy ways to take advantage of the market.
1. Keep up with current news.
Current news includes earnings dates, economy news (jobs and interest rates), and dividend dates.

2. Pick two stocks (three max) and follow them on a daily basis. Read about the company and concentrate what analyst are saying about the company.

3. My personal favorite, if the market takes a big hit (last week, May 9-13) then look for the market to rebound the following week.

For instance, Caterpillar (CAT) soared the week leading up to earnings about 10%. In the mean time, Caterpillar has backed off and has retreated almost 9%.

This tells me that you can currently invest in Caterpillar at a discount and ride it back to the top.

Here are my stock picks for the week.
1. Caterpillar CAT $106.41
2. Boeing BA $78.80
3. Deere DE $87.80

All companies are selling at a discount and distribute dividends.

Stock recommendations and comments presented are solely options and opinions and should not factor in to your decision to buy sell or hold a particular security.
 All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.