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By Jason Stipp | 02-12-2010 12:08 PM

How to Prioritize Tax-Advantaged Accounts

Morningstar's Christine Benz offers tips on deciding where to put money first among 401(k), IRA, and Roth accounts.

Jason Stipp: I'm Jason Stipp with Morningstar. It's tax relief week on morningstar.com, and today we're talking about your tax-advantaged accounts. These are your 401(k)s, your IRAs, your Roth IRAs. There are a lot of options there. So here with me to talk through some of these is Morningstar's Christine Benz. She's director of personal finance. Thanks for joining me, Christine.

Christine Benz: Jason, nice to be here.

Stipp: So, when I'm thinking about these tax-advantaged accounts that are treated differently and that have some different pros and some different benefits, where should I start with where I should put my money away for these retirement accounts?

Benz: The first starting point is to check on whether you're earning any sort of matching contributions on your company retirement plan contributions. So, that's the starting point. If you are, you should definitely invest at least enough to earn that match, regardless of whether the company retirement plan is good or not so good.

Stipp: Sure. So these are your 401(k), the 403(b). These are the ones where they take money out of your paycheck before taxes and put it in so that you kind of get a little bit of a tax benefit now for those, and then when you take the money out later, you're actually taxed on that.

Benz: Exactly. And those company retirement plans are so easy to invest in, because you have that enforced discipline. And also, as you said, the money is coming out on a pre-tax basis, so it's not really all that painful.

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