If you are eligible for a 401K, you should do it. You have to be working for a company or you can start one for your company.
The max on a 401k is 15,500 this year. So you can put away 15,500 of your taxable income into it in 2008. Why do you want to do this now, it's because it might help you lower the amount of money you are paying out to the government. Say you are in the 28% tax bracket. That's $4,340 that you would be keeping instead of giving it to uncle sam to fund the war.
If you earn over 150K, i'm not sure on the amount, then you can only fund the 401K and aren't eligible to fund either a Roth or IRA. You can set one up one for your wife, but I forgot again at what limit.
If you own your own company, even though it will cost you some cash to setup a 401K or employer contributed IRA, it is worth it in the long run. You really need to talk to a tax advicer about this idea.
Why shouldn't you put money in a 401k or an IRA? Because you will be taxed more when you retire. Very few us on GFY are going to earn less when we retire, if anything we will be makeing even more, even if it's residual income.
The benifit of the Roth, is that the money won't be taxed when you retire.
Because You can't see into the future I say found whatever you are eligible to fund now.
If you are in your 20's now is the best time to fund one of these plans, even if you stop when you get older. If you fund an IRA from your 20th birthday to when you are 30 years old, you will easily have 700K by the time you retire.
If you have a son/daughter and you want to leave them 1 million dollars, simply fund an IRA or Roth in their name from age 15 to 18 with 3k a year. Just fund it for every year while they are in high school. When they reach retirement you will have left them 1 million.
Oh one point. 1 million will be worth allot less when we retire. When I retire 1 Million will be less then 400k in today's money.
