The Individual Retirement Account Debate Continued

We will further continue the discussion with the pros and cons to each individual retirement account. A part of the debate not previously discussed that we need to address is the fact that an employer can match a contribution you make to any of your 401ks. If your employer does match contributions then not only would your principal be be higher by age 65 as previously discussed. But the interest you can earn will be greater as well.

Let's say that your employer matches 50% of your contributions. Using the same figures as before of $4,000. The new amount of contribution in your 401k will be $6,000. Plugging $6,000 into the same formula used as before we come up with a principal amount of $1,626,146 by age 65. Considering the contribution is twice as much between the roth ira and the 401k, it makes since that the principal would be double as well. If you remember the principal of the roth at age 65 was $813,073. The difference between the two now is $813,073. The following graph illustrates this new calculation.

Click here to review previous individual retirement account graph