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Tax deferred accounts have been created to help people plan for retirement. Money grows via this equation: (time x savings rate x % return). If you start at a young age you have the leverage of time on your side. The "time value of money" leverage can help make you financially secure. If you combined the time value of money and the benefits from the tax reduction, in these tax deferred accounts...you can become a millionaire.

Another point to consider is how you can blend the use of the two tax deferred accounts. Note the table below and its implications after retirement.

Effective Use of Tax Deferred Accounts
	401k	Roth IRA
Invest Pre-Tax	Yes	No
Matched Money	Yes	No
Grows Tax Free	Yes	Yes
Taxed When Taken Out	Yes	No
Must Take At Age 70.5	Yes	No

We believe it is good to have a blend of these two types of tax deferred investments. In the 401k type accounts you should max out on the pre-tax contributions and matched portions. Any excess savings that you can generate, think about putting it into a Roth IRA.

The benefits become pronounced at retirement age when you will not be required to take money out of your Roth IRA, and it will continue to grow tax free for another 10 to 20 years. If your 401k monies end up a bit short because you live past the average life expectancy projections, then tap into your Roth IRA. There are estate planning issues to consider also. A Qualified Financial Planner can help you manage these issues as your "nest egg" grows and you have so much money that it requires you to manage an estate.