Date: Fri, 18 Aug 2006 12:47:58 -0500
From: joetaxpayer 
Subject: Re: Which is best: 401K, ESOP (with 15% discount from employer),
 Roth, or ... ?
Newsgroups: misc.invest.financial-plan
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franklin.bowen@gmail.com wrote:

> Which is best: 401K, ESOP (with 15% discount from employer), Roth, or
>  ... ?
> 
> I looked around some but could not find a comparison of these 3
> options.  I was going to put the max into my company's ESOP because
> they offer a 15% discount on the stock price ("free" money, right?) but
> since I have sold all my other ESOP stock in the past, I thought the
> 401K may be a better choice for me.  

1) Max out the ESOP and be prepared to flip the stock when it hits the 
account. This is a 17% return (100/85) on an average holding period of 3 
months. (deposits over 6 months, right?) Even if you take on some debt, 
this pays off. There are variation on this plan, such as sell only 90% 
of the stock. You'd get all your money back, plus a bit more, and have 
10% invested in this stock. It would take years till this became over 
weighted in your portfolio.

2) If the 401 offers a match, put in as much money as gets matched.

3) MAX out the Roth, if you are eligible.

4) go back to the 401 till that's maxed.


The fear of having too much pre-tax money in retirement is valid, but 
unlikely. You'd first have to in a low bracket now, say 15%, which is 
single taxable up to $29.7K, but somehow save enough to force 
withdrawals above that amount to jump to the 25% bracket.
JOE