Retirement planning 401(k), IRA, pension, student loans
You asked specifically about the ROTH IRA option and stated you want to get the most bang for your buck in retirement.  While others have pointed out the benefits of a tax deduction due to using a Traditional IRA instead, I haven't seen anyone point out some of the other differences between ROTH and Traditional, such as: I agree with your thoughts on using an IRA once you maximize the company match into a 401k plan.   My reasoning is: I personally prefer ETFs over mutual funds for the ability to get in and out with limit, stop, or OCO orders, at open or anytime mid-day if needed.  However, the price for that flexibility is that you risk discounts to NAV for ETFs that you wouldn't have with the equivalent mutual fund.  Said another way, you may find yourself selling your ETF for less than the holdings are actually worth.  Personally, I value the ability to exit positions at the time of my choosing more highly than the impact of tracking error on NAV. Also, as a final comment to your plan, if it were me I'd personally pay off the student loans with any money I had after contributing enough to my employer 401k to maximize matching.  The net effect of paying down the loans is a guaranteed avg 5.3% annually (given what you've said) whereas any investments in 401k or IRA are at risk and have no such guarantee.  In fact, with there being reasonable arguments that this has been an excessively long bull market, you might figure your chances of a 5.3% or better return are pretty low for new money put into an IRA or 401k today.  That said, I'm long on stocks still, but then I don't have debt besides my mortgage at the moment.  If I weren't so conservative, I'd be looking to maximize my leverage in the continued low rate environment. None of your options seem mutually exclusive.  Ordinarily nothing stops you from participating in your 401(k), opening an IRA, qualifying for your company's pension, and paying off your debts except your ability to pay for all this stuff.  Moreover, you can open an IRA anywhere (scottrade, vanguard, etrade, etc.) and freely invest in vanguard mutual funds as well as those of other companies...you aren't normally locked in to the funds of your IRA provider. Consider a traditional IRA.  To me your marginal tax rate of 25% doesn't seem that great.  If I were in your shoes I would be more likely to contribute to a traditional IRA instead of a Roth.  This will save you taxes today and you can put the extra 25% of $5,500 toward your loans.  Yes, you will be taxed on that money when you retire, but I think it's likely your rate will be lower than 25%.  Moreover, when you are retired you will already own a house and have paid off all your debt, hopefully.  You kind of need money now.  Between your current tax rate and your need for money now, I'd say a traditional makes good sense.  Buy whatever funds you want.  If you want a single, cheap, whole-market fund just buy VTSAX.  You will need a minimum of $10K to get in, so until then you can buy the ETF version, VTI.  Personally I would contribute enough to your 401(k) to get the match and anything else to an IRA (usually they have more and better investment options).  If you max that out, go back to the 401(k). Your investment mix isn't that important.  Recent research into target date funds puts them in a poor light. Since there isn't a good benchmark for a target date fund, the managers tend to buy whatever they feel like and it may not be what you would prefer if you were choosing.  However, the fund you mention has a pretty low expense ratio and the difference between that and your own allocation to an equity index fund or a blend of equity and bond funds is small in expectation.  Plus, you can change your allocation whenever you want. You are not locked in. The investment options you mention are reasonable enough that the difference between portfolios is not critical.  More important is optimizing your taxes and paying off your debt in the right order. Your interest rates matter more than term does. Paying off debt with more debt will help you if the new debt has a lower interest rate and it won't if it has a higher interest rate.  Normally speaking, longer term debt has a higher interest rate.  For that reason shorter term debt, if you can afford it, is generally better.  Be cold and calculating with your debt.  Always pay off highest interest rate debt first and never pay off cheap debt with expensive debt. If the 25 year debt option is lower than all your other interest rates and will allow you to pay off higher interest rate debt faster, it's a good idea.  Otherwise it most likely is not.  Do not make debt decisions for psychological reasons (e.g., simplicity).  Instead, always chose the option that maximizes your ultimate wealth. "I'd suggest you avoid the Roth for now and use pretax accounts to get the greatest return. I'd deposit to the 401(k), enough to get as much match as permitted, then use a traditional IRA. You should understand how tax brackets work, and aim to use pre-tax to the extent it helps you avoid the 25% rate. If any incremental deposit would be 15% money, use Roth for that. Most discussions of the pre-tax / post tax decision talk about 2 rates. That at the time of deposit and time of withdrawal. There are decades in between that shouldn't be ignored. If you have any life change, a marriage, child, home purchase, etc, there's a chance your marginal bracket drops back down to 15%. That's the time to convert to Roth, just enough to ""top off"" the 15% bracket.  Last, I wouldn't count on that pension, there's too much time until you retire to count on that income. Few people stay at one job long enough to collect on the promise of a pension that takes 30+ years to earn, and even if you did, there's the real chance the company cancels the plan long before you retire."
No, it's a $10k withdrawal. You net what you net after federal and state taxes.  IRA? It has a similar penalty free $10k withdrawal option for home purchase,  so this might give faster access once you decide.  Given the choice between a withdrawal and a loan, I'd take the loan. As soon as you are with the new employer, ask HR about the rules for participating in their 401(k) and rules for their loans. If, for whatever reason it won't work for you, take $10K and transfer to the IRA, and the rest into the 401(k), if the 401(k) has good investments and low cost..  My answer focuses on the desire to withdraw the money. A loan is better than a withdrawal. Better than both is a delay and saving all you can for the downpayment. After the closing, I'd be mindful of spending, save all you can to retirement accounts and pay this loan off over the time good for you. "I'll add 2 observations regarding current answers.  Jack nailed it - a 401(k) match beats all. But choose the right flavor account.  You are currently in the 15% bracket (i.e. your marginal tax rate, the rate paid on the last taxed $100, and next taxed $100.) You should focus on Roth. Roth 401(k) (and if any company match, that goes into a traditional pretax 401(k). But if they permit conversions to the Roth side, do it) You have a long time before retirement to earn your way into the next tax bracket, 25%. As your income rises, use the deductible IRA/ 401(k) to take out money pretax that would otherwise be taxed at 25%.  One day, you'll be so far into the 25% bracket, you'll benefit by 100%   traditional. But why waste the opportunity to deposit to Roth money   that's taxed at just 15%? To clarify the above, this is the single rate table for 2015:  For this discussion, I am talking taxable income, the line on the tax return designating this number. If that line is $37,450 or less, you are in the 15% bracket and I recommend Roth. Say it's $40,000. In hindsight on should put $2,550 in a pretax account (Traditional 401(k) or IRA) to bring it down to the $37,450. In other words, try to keep the 15% bracket full, but not push into 25%.  Last, after enough raises, say you at $60,000 taxable. That, to me is ""far into the 25% bracket."" $20,000 or 1/3 of income into the 401(k) and IRA and you're still in the 25% bracket. One can plan to a point, and then use the IRA flavors to get it dead on in April of the following year.  To Ben's point regarding paying off the Student Loan faster - A $33K income for a single person, about to have the new expense of rent, is not a huge income. I'll concede that there's a sleep factor, the long tern benefit of being debt free, and won't argue the long term market return vs the rate on the loan. But here we have the probability that OP is not investing at all. It may take $2000/yr to his 401(k) capture the match (my 401 had a dollar for dollar match up to first 6% of income). This $45K, after killing the card, may be his only source for the extra money to replace what he deposits to his 401(k). And also serve as his emergency fund along the way." "Assuming the numbers work out roughly the same (and you can frankly whip up a spreadsheet to prove that out), a defined benefit scheme that pays out an amount equal to an annuitized return from a 401(k) is better.  The reason is not monetary - it is that the same return is being had at less risk. Put another way, if your defined benefit was guaranteed to be $100/month, and your 401(k) had a contribution that eventually gets to a lump sum that, if annuitized for the same life expectancy gave you $100/month, the DB is better because there is less chance that you won't see the money. Or, put even simpler, which is more likely? That New York goes Bankrupt and is relieved of all pension obligations, or, the stock market underperforms expectations.  Neither can be ruled out, but assuming even the same benefit, lower risk is better. Now, the complication in your scenario is that your new job pays better.  As such, it is possible that you might be able to accumulate more savings in your 401(k) than you might in the DB scheme.  Then again, even with the opportunity to do so, there is no guarantee that you will.  As such, even modelling it out really isn't going to dismiss the key variables. As such, can I suggest a different approach?  Which job is going to make you happier now?  Part of that may be money, part of that may be what you are actually doing.  But you should focus on that question. The marginal consideration of retirement is really moot - in theory, an IRA contribution can be made that would equalize your 401(k), negating it from the equation.  Grant you, there is very slightly different tax treatment, and the phaseout limits differ, but at the salary ranges you are looking at, you could, in theory, make decisions that would have the same retirement outcome in any event. The real question is then not, ""What is the effect in 20 years?"" but rather, which makes you happier now?" "IRA is not always an option. There are income limits for IRA, that leave many employees (those with the higher salaries, but not exactly the ""riches"") out of it. Same for Roth IRA, though the MAGI limits are much higher. Also, the contribution limits on IRA are more than three times less than those on 401K (5K vs 16.5K). Per IRS Publication 590 (page 12) the income limit (AGI) goes away if the employer doesn't provide a 401(k) or similar plan (not if you don't participate, but if the employer doesn't provide). But deduction limits don't change, it's up to $5K (or 100% of the compensation, the lesser) even if you're not covered by the employers' pension plan. Employers are allowed to match the employees' 401K contributions, and this comes on top of the limits (i.e.: with the employers' matching, the employees can save more for their retirement and still have the tax benefits). That's the law. The companies offer the option of 401K because it allows employee retention (I would not work for a company without 401K), and it is part of the overall benefit package - it's an expense for the employer (including the matching). Why would the employer offer matching instead of a raise? Not all employers do. My current employer, for example, pays above average salaries, but doesn't offer 401K match. Some companies have very tight control over the 401K accounts, and until not so long ago were allowed to force employees to invest their retirement savings in the company (see the Enron affair). It is no longer an option, but by now 401K is a standard in some industries, and employers cannot allow themselves not to offer it (see my position above)." You will want to focus on how much is needed for retirement, and what types of investments within the current 401K offerings will get you there. Also will need to discuss non-401K investments such as an IRA, college savings, savings for a house, and an emergency fund.  The 401K should be a part of your overall financial picture, how much you invest in the 401K depends on the options you have (Roth 401K available), how much matching (some a little or a lot), and your family plans.  You have a few choices:  Your company through the 401K provider may provide this service. They may have limited knowledge in what non-401K funds you should invest in, but should be able to discuss types of investment. Fee only planner. They will be able to discus types of investments, and give you some suggestions. Because they don't work on a commission they will not make the investment for you. You need to be able to make the actual selection of investments, so make sure you get criteria to focus on as part of the package.  Commission based planner. Will make money off your investment choices. May steer you towards investments that their company offers or ones that offer them the best commissions in that investment type. If the 401K doesn't use funds that the planner can research you will need to provide a copy of the prospectus provided by the 401K. My suggestion is the fee only planner. They balance the limited focus of the 401K company without limiting themselves to the funds their company sells. Before sitting down with the planner get in writing how they fee structure works. A flat fee or hourly fee planner will be expecting you to do all the investment work. This is what you want. Let the fee only planner help you define your plan. But also reanalyze the plan every few years as your needs change. "I humbly disagree with #2. the use of Roth or pre-tax IRA depends on your circumstance. With no match in the 401(k), I'd start with an IRA. If you have more than $5k to put in, then some 401(k) would be needed.  Edit - to add detail on Roth decision. I was invited to write a guest article ""Roth IRAs and your retirement income"" some time ago. In it, I discuss the large amount of pretax savings it takes to generate the income to put you in a high bracket in retirement. This analysis leads me to believe the risk of paying tax now only to find tHat you are in a lower bracket upon retiring is far greater than the opposite. I think if there were any generalization (I hate rules of thumb, they are utterly pick-apartable) to be made, it's that if you are in the 15% bracket or lower, go Roth. As your income puts you into 25%, go pretax. I believe this would apply to the bulk of investors, 80%+." Rather than rolling the 401(k) to a new employer's plan, you should roll it into a traditional IRA.  You get more options for the money, there's no limit on how much you can roll over, and you have more control over the money.  If you do a direct rollover, there's no taxes or penalties involved. I'd recommend against taking any money out of the 401(k).  With the numbers you give above, it's like borrowing money at 31.5% interest, which is pretty high, and you're sacrificing your future retirement.  If you leave that money alone to grow with compounding, you'll have a lot more when you retire.  If you're not familiar with the concept of compound interest, it's worth reading up on - the numbers will blow you away. At the very least, if you desperately need to get $3000 out of it, take out just enough to net $3000 after taxes and penalties (not quite $4400 using the numbers you give) and do a rollover with the rest.  At least that way, you're keeping more in the IRA (just over $8600, vs the $5000 in your proposed scenario). Overall, I really recommend you find a way to accomplish your goals without touching your retirement savings. Saving for college you have a couple of options.  529 plans are probably the best bet for most people wanting to save for their kids college education. You can put a lot of money away ~$300k and you may get a state tax deduction. The downside is if you're kid doesn't go to college you may end up eating the 10% penalty. State specific prepaid tuition plans. The upside is you know roughly the return you are going to get on your money. The downside is your kid has to go to a state school in the state you prepaid or there are likely withdrawal penalties. For the most part these really aren't that great of a deal any more.  ESAs are also an option but they only allow you to contribute $2k/year, but you have more investment options than with the 529 plans. Traditional and ROTH IRA accounts can also be used to pay for higher education. I wouldn't recommend this route in general but if you maxed out your 401k and weren't using your IRA contribution limits you could put extra money here and get more or really different flexibility than you can with a 529 account. I doubt IRA's will ever be asked for on a FAFSA which might be helpful. Another option is to save the money in a regular brokerage account. You would have more flexibility, but lower returns after taxes. One advantage to this route is if you think your kid might be borderline for financial aid a year or two before he starts college you could move this money into another investment that doesn't matter for financial aid purposes. A few words of caution, make sure you save for retirement before saving for your kids college. He can always get loans to pay for school but no one is going to give you a loan to pay for your retirement. Also be cautious with the amount of money you give your adult child, studies have shown that the more money that parents give their adult children the less successful they are compared to their peers.