How to Prioritize Tax Advantaged AccountsMorningstarJason Stipp: Im Jason Stipp with Morningstar. Its tax relief week on Morningstar.com and today were talking about your tax advantage account so here your 401ks your IRAs your Roth IRAs theres a lot of options there so here with me to talk through some of these is Morningstars Christine Benz. Shes Director of Personal Finance thanks for joining me Christine.Christine Benz: Jason nice to be here.Jason: So when Im thinking about these tax advantaged accounts theyre treated differently and they have some different pros and some different benefits where should I start with where I should put my money away from me for time and accounts?Christine: The first starting point is to check on whether youre earning any sort of matching contributions on your company retirement plan contributions so thats 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.Jason: So these are your 401k. The 403b these are the ones where they take money out of your pay check and put it in 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 are actually taxed on that?Christine: Exactly and those company retirement plans are so easy to invest in because you have that forced discipline and also as you said the money is coming out on your pre tax basis so its not really all that painful.Jason: Right so were going to talk a little bit in separate video about how to kind of determine whether your 401k is good quality but certainly you want to at least try to get that match if you can but lets say that we know we sort of examine our 401k the options maybe dont look that great it seems a little expensive what would be my next step then if I still had money I wanted to invest?Christine: For most investors, the Roth IRA is going to be a good next step and there are a couple of key reasons first of all the tax treatment can be particularly attractive if you think you maybe in a higher tax bracket when you retire and maybe well all be in a higher tax bracket when we retire so the opportunity to get tax free withdrawals is very attractive and also you dont have to take withdrawals in retirement if you dont need that money so you can pass it on to your heirs if you want to. Any other key advantage to any sort of IRA is that open architecture which you do not get with most 401k plans where you are confined to a preset menu choices.Jason: So certainly a lot more options and a lot more flexibility by going to that IRA the taxes are different with a Roth IRA in the way theyre handled so you know I think that could be beneficial even if my 401k seems like its pretty good. Should I still think about putting money in a Roth IRA?Christine: Yes and you hit on something really important Jason and thats tax diversification so we all know about asset class diversification having money parked among stocks and bonds and international and so forth. We also want the same thing with your tax treatment of your retirement assets so maybe youre a person who has amassed a lot of assets in your 401k so youve got a lot of money thats going to be taxed upon withdrawal. Its an attractive idea to get at least some of your assets into that tax free withdrawal column which is what you get with a the Roth IRA.Jason: So when you get down the line you have a little more options a little more flexibility depending on what the situation looks like?Christine: Exactly.Jason: So one more option thats available that to some investors and maybe it will be available to more as we go a long as the Roth 401k so heres somebody else in the mix, how should I think about that if its available to me?Christine: Its increasingly available in plans and I think there are two categories of individuals for whom the Roth 401k contributions make a lot of sense. First would be the person just starting out and maybe in a low tax bracket relative to where they think theyll be women retired so that would be one candidate and the other would be the person, the same person who might have already amassed a lot of assets in a traditional 401k who is looking for some retirement assets that will not be taxed upon withdrawal retirement so for that individual maybe theyre maxing out the 401k contributions perhaps have not been able to contribute to a Roth IRA to date due to income limitations that person might want to look at a ROTH 401k as well.Jason: Gives them the option to have a little bit of that diversification if they want to on the tax side.Christine: Exactly.Jason: Well thank you for your insights Christine.Christine: Thanks Jason.Jason: For Morningstar Im Jason Stipp thanks for watching.