<p>My DS, who just started working, will be eligible to contribute on July 1. What’s the current thinking on which one of these is better for a young person?</p>
<p>There are a lot of variables–mainly, what is the future earning potential for him? Will he reach a point soon where he can’t contribute to a Roth (AGI of 110K or less)? Will he be able to have a traditional 401K later? Does he have the funds to do both? If both, I would put the Roth money into a personal plan and put the “company” money into the traditional 401K. Since there are options with a Roth to use some funds for down payment for a first house, etc. I prefer to have those funds outside of company control personally.</p>
<p>Roth 401K, at least while he’s in a low tax bracket (25% or less.)</p>
<p>Agree. Roth. Let it grow tax free for a long as possible.</p>
<p>Roth accounts are the best for as long as possible, as presumably income will rise and the earner starts out in a lower tax bracket that s/he will be when the funds are needed.</p>
<p>S is employed as an independent contractor- Can he contribute to a ROTH Ira if his income is 1099 versus W-2 earnings?</p>
<p>^Yes, as long as he makes under the income requirements.</p>
<p>Mom60-yes, he can as long as he has earned income and a 1099 qualifies–however, there are some nice perks to some self-employed plans that he may want to talk to a financial adviser about, one that specializes in small business owners especially. Mainly he can put away a lot more in one vs a Roth or Traditional IRA.</p>
<p>Thanks. He isn’t exactly rolling in the dough.</p>
<p>If he is self-employed, in addition to the Roth IRA, he can also set up his own retirement plan to replace the 401k that a company would offer. The easiest one (as I recall) is the SEP. Details here: <a href=“http://www.irs.gov/pub/irs-pdf/p560.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p560.pdf</a> A while back I set up a SEP with my credit union. In years when I have some self-employment income, I am able to continue to contribute to it.</p>
<p>VeryHappy–make sure your son checks whether his employer offers any kind of a match for 401(k) funds. I know it seems obvious to us parents but this is something I could easily see my daughter missing.</p>
<p>For self employeed, Open a Solo 401K account, he can “shelter” as much as $98,000 of their earnings, if married. More for those over 55.</p>
<p>[Solo</a> 401k Real Estate | Real Estate 401k | Solo K Real Estate](<a href=“http://mysolo401k.net/401kreal-estate.html]Solo”>Solo 401k FAQs - My Solo 401k Financial)</p>
<p>If he really makes BIG money, ie. Over 500K/yr or more…</p>
<p>You can have a Defined Benefit Program, you can “shelter” almost double of your “salaries” you paid to yourself, but that is another chaper when the road crosses.</p>
<p>Amesie – thanks. Yes, he gets a match and is well aware of it. We had a wonderful 17 minutes yesterday when we reviewed his benefit choices and I helped him. Since this is what I’ve done as a career for 30 years, it was very gratifying to have him ask for me opinion!!</p>