Are there any benefits in contributing to my employer's 401(k) as opposed to my individual Roth IRA if my employer doesn't match my contributions?

I opened a Roth IRA years ago before I was enrolled in a company 401(k) plan. I now work for the State of California and I am enrolled in a 401(k) plan. However, the 401(k) plan does not match my contributions. Are there any benefits in contributing to my employer's 401(k) as opposed to my individual Roth IRA? Is there one that I should focus on first?

Financial Planning, 401(k), IRAs
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5 days ago

Generally speaking, if there is no employer match, I recommend contributing to a Roth IRA instead of the employers plan.  You'll have more investing options at (usually) a lower cost.

A few situations that may make the 401k a better option:

1.  Creditor protection is better in a 401k plan vs. a Roth IRA.  If you have a creditor issue, a 401k may be a better option.

2.  Access to a high-paying stable value fund in the 401k plan.  I've seen 401k plans with a grandfathered stable value fund paying 5%!  It's hard to pass that up for the cash portion of your portfolio.

3.  Access to institutional-class shares in the 401k plan.  Sometimes the costs of these shares are lower than what you could access on your own, especially if you're just getting started with investing.

4.  Obviously, if you're over the income limit for a Roth IRA, go with the 401k instead.

Great question and best of luck.  Be sure to follow up if you need more information.

 

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