Roth vs. 401(k): Where should my money go?

(Money Magazine) -- Question: I'm 27 and contribute enough to my 401(k) to get the maximum match. I also invest a significant amount to a Roth IRA account for which I pay a 5.75% sales charge. My question: Would I be better off putting more in my 401(k) since it has no sales charge or continue with the Roth and eat the 5.75%? -- N.F., Minneapolis, MN

Answer: You've probably seen that hilarious Kia Soul commercial with the hip-hop hamsters doing the Black Sheep tune The Choice is Yours: "This or that. This or that...You can get with this, or you can get with that. You can get with this, or you can get with that."

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Ultimate Guide to Retirement

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So what in the world do rapping rodents have to do with your retirement-planning strategy? Simple. As many people do when they're considering what to do with their money, you've couched the situation as digital, as if you have just two choices.

This (stick with your 401(k)) or that (do the Roth IRA with a 5.75% sales charge). But those aren't your only options.

In fact, a third choice that I think you might find quite appealing immediately comes to mind: A Roth IRA without a sales charge. Can you get with that?

Just to be clear, it's not your Roth IRA that's charging you 5.75% of what you invest. The 5.75% is a sales commission, also known as a sales load, that you're paying to the person who sold you the fund or funds you're buying inside your Roth IRA account.

A portion of that 5.75% -- or $287.50 if you contribute the $5,000 maximum to your Roth IRA -- goes to compensate the broker, planner or whatever adviser you worked with for helping you choose a fund or group of funds for your Roth IRA that make sense for you.

So, in theory at least, you're getting advice for paying that charge. And for all I know that may be money well spent. Maybe you would have picked a fund by throwing darts at the financial page.

Or perhaps you would have put your money into something totally inappropriate like one those wacky double or triple leverage ETFs. Or maybe you would have felt overwhelmed by the thousands of investment choices out there and ended up doing nothing.

Ultimately, it's up to you to decide whether you got good value for the sales charge you paid. And if your Roth IRA is invested in something that's right for you and you're satisfied, that's fine.

But you might want to at least consider choosing a Roth IRA investment on your own and avoid having to shell out the bucks that would have gone to the sales charge.

All else equal, over a long span avoiding that fee can leave you with a much bigger Roth.

For example, let's say that you have $5,000 a year for the next 10 years to contribute to a Roth IRA. If 5.75% of each five grand contribution goes to sales charges, that leaves you with $4,712.50 to put into the Roth. Assuming a 7% annual return, you would have just over $463,000 in your Roth IRA at age 65.

If, on the other hand, you invested the full $5,000 each year and earned the same 7% annual return, you would end up with just over $491,000 in your Roth IRA, or an extra $28,000 tax-free.

Granted, if you fly solo as opposed to working with an adviser you're going to have to do some legwork to decide how to invest your Roth contributions. But it's not as if picking decent funds and building a portfolio is rocket science.

In fact, if you bone up on investing basics and follow a few simple tips I've outlined before, you should be able to create a nice little Roth IRA for yourself without too much trouble.

And if you want to really make things simple, you can invest your Roth in a target-date retirement fund, which gives you a diversified portfolio of stocks and bonds all in one fund and automatically shifts to a more conservative stance as you age.

I'd also add that while you're sidestepping that sales fee, you should also take care to avoid investment choices that charge high annual expenses.

For example, if higher expenses had siphoned even just an extra one-half of a percentage point a year off your return in the example above, your balances in both scenarios would have been reduced by roughly 15%, or more than $72,000 in the case of the sales charge-free Roth.

You can hold the line on ongoing expenses by sticking to low-cost funds like those in our MONEY 70 list of recommended funds.

I'm particularly a fan of the broad index funds on our roster, such as the total stock and total bond market funds. But if you like the target-date concept, you'll find target funds there too.

Bottom line: I generally think it's a good idea to have some money in a Roth account to complement balances in tax-deferred vehicles like traditional IRAs and 401(k)s, especially in the case of a young person like yourself. Indeed, I've recommended this very strategy many times before.

But while I wouldn't go so far as to say you absolutely shouldn't do a Roth if you feel there's no other way than to pay a sales charge, I think there's a very good chance you'll be much better off if you avoid the fee. But, as the rapping hamsters say, "The choice is yours."