[Kristine]

My company had a 401k available last year but they did not contribute anything until tiis coming year so I didn’t sign up to participate.

I have thought about opening a Roth 401k for 2024 and dropping the maximum

amount into it. What benefits would there be for me to do this as opposed to maybe investing the money into some mutual funds?

[Jule]

Roth = tax free growth. You won’t be paying for capital gains taxes unlike a regular brokerage.

Also, you can only contribute through payroll.

You can’t just “drop the max” for the year.

[Suzanne]

401(k)s have to be funded by the end of the year, which is tomorrow so I don’t think you’re going to have time to do that.

A Roth, 401(k), traditional, 401(k) are different kind of accounts for either one of them you would invest it into mutual funds that are offered by the plan.

A traditional 401(k) would reduce your taxable income, a Roth 401(k) they would take the taxes out now.

Alternately, you can invest in mutual funds in a brokerage account .

[Mike]

It seems like you might be mixing up a few concepts. You can’t just dump a bunch of money into a 401k, it’s an employer-sponsored plan and contributions typically have to be made through payroll.

You’ve missed the boat for 2024.

Also, a 401k isn’t an investment, it’s a type of account within which you buy investments (like mutual funds).

The advantage of buying mutual funds within a 401k as opposed to a normal brokerage account is that it is a tax-advantaged account (e.g. in a Roth account, your money is taxed now but you’ll pay no taxes when you later withdraw).

In a normal brokerage account you’re putting in money that’s already been taxed, and it will (probably) be taxed again later when you sell.

If your employer is now offering a 401k match, make sure you begin contributing at least enough to get the full match.

[Lisa]

Why would you not fund your 401k just because the employer didn’t contribute? You can put the most away in a 401k as an employee. Nothing you can do now, but start contributions in 2025.

What’s your taxable income? That’s the only was to know if you should fund a regular or Roth account. High income earners use pretax, low income earners use Roth.

If you have extra funds after your 401k, then fund a Roth (May need to do a backdoor Roth).

Do you have a Sch C? This is the only way you can open a 401k…you can’t if you are a W-2 employee…your employer would have to open it.

[Sean]

The benefits of investing in tax advantaged accounts are the tax advantages of the accounts.

[Frank]

They are the same kinds of investments in two different accounts. 401ks just have tax advantages.

[Author]

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