Assuming that you can contribute to either a 401(k) or a Roth IRA, where does it make the most sense to put your dollars?

Systematic payments from paycheck take sting out of contributing. Assets fully protected from creditors by federal law. Many 401(k) plans allow participants to borrow against their 401(k) funds. Minimum distributions are required after age 70½. Contributions are made with pretax dollars, distributions are taxed when received.* Many 401(k) plans have an employer "match" (e.g. employer matches a specific percentage of employees' contributions). You should contribute enough to get maximum match. If you will be in a lower tax bracket when you retire, a 401(k) may be more appealing.		Virtually unlimited investment options. Total IRA assets protected in bankruptcy up to $1,095,000 (as of 4/1/07) (and more in some cases) under federal law. State law may afford additional protection from creditors. Easier access to funds. No required minimum distributions after age 70½. Contributions are made with after-tax dollars, but qualified distributions are tax free. Qualified (tax-free) distributions can include up to $10,000 for first-time homebuyer expenses. If you will be in a similar or higher tax bracket when you retire, a Roth IRA may be more appealing.

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If you qualify for both and have the available cash, you can do both.

Note: Under the Economic Growth and Tax Relief Reconciliation Act of 2001 (the "2001 Tax Act"), starting in 2006, an employer can allow employees to make after-tax "Roth" contributions to the employer's 401(k) plan. Qualified distributions of these contributions and related earnings will be tax free. The requirements for a qualified distribution are the same as for Roth IRAs, except that there is no provision for first-time homebuyer expenses. This illustration does not address Roth 401(k) contributions.

*Distributions made prior to age 59½ (age 55 under certain circumstances) may be subject (in whole or in part) to the 10 percent premature distribution tax.