Earl E Retyre
Full time employment: Posting here.
- Joined
- Jan 1, 2010
- Messages
- 541
I have a simple question regarding Roth 401k early withdrawal.
My daughter has the option to invest in a Roth 401k through her 1st job and the company will do a 100% match up to 5% of pay. I recommended that she should max that out and let the money grow.
So, here is the question ... I believe in an absolute worst case scenario if she needs to withdraw the money, she only pays a 10% penalty and since the company matches 100% then she is way ahead of the game. Let's say she put $1,000 in her Roth and the company matched $1,000 so at the end of the 1st year she has $2,000. If she withdrew the money at the end of year 1 then she would get $2,000 minus a 10% penalty of $200 for a total of $1,800. With the company match she made an extra $800 when compared to not investing in the Roth. Please validate. Assuming my logic is correct then it seems silly for anyone in her situation to not invest in the Roth. Even if you need to pull the money out, you have earned a lot more due to the company match.
Thanks and Merry Christmas.
My daughter has the option to invest in a Roth 401k through her 1st job and the company will do a 100% match up to 5% of pay. I recommended that she should max that out and let the money grow.
So, here is the question ... I believe in an absolute worst case scenario if she needs to withdraw the money, she only pays a 10% penalty and since the company matches 100% then she is way ahead of the game. Let's say she put $1,000 in her Roth and the company matched $1,000 so at the end of the 1st year she has $2,000. If she withdrew the money at the end of year 1 then she would get $2,000 minus a 10% penalty of $200 for a total of $1,800. With the company match she made an extra $800 when compared to not investing in the Roth. Please validate. Assuming my logic is correct then it seems silly for anyone in her situation to not invest in the Roth. Even if you need to pull the money out, you have earned a lot more due to the company match.
Thanks and Merry Christmas.