Are 401(k)s a meme beyond employer match? Why would I put an extra 6,600 a year into an account that'll probably be taxed at a higher rate when I withdraw from it when I retire, when I could keep it liquid and do as I please with it, to be more or less risky whenever I want.
The only thing I can think of is if you expect the untaxed portion to gain so much interest that, post-tax, it'll be worth a lot more than if you had paid taxes on it and tried to grow it. Is that correct? If it is, aren't Roth 401ks and Roth IRAs useless (past employer match)?
Anyway, I have 4135/month left over after expenses. I'm thinking 550 to 401k (+550 from match), put into some random Vanguard index funds I haven't chosen yet.
0 to IRA because I can't fathom what the point is.
Then I have 3585 left. Do I put this into some more index funds with Vanguard? Is a robo broker like Betterment a better idea? I just don't want to do too much work and I'm OK with high risk in the short term.
So if I'm understanding correctly, a Roth 401k is where I pay taxes immediately and then it goes into a 401k. Why would I do this when I can pay taxes and then keep it liquid and do what I want with it?
Evan Sanders
Wait a minute. That untaxed portion thing doesn't make sense either.
Compound interest formula is P(1+r)^t. Either you pay taxes before or after, both ways the entire term has a multiplicative factor of the taxes. So it doesn't matter at all, so it just comes down to whether taxes will be higher later or sooner. But if you choose to bet on sooner with a 401k, then you are penalized by having a ton of your money not be liquid for 40 years.
Isaac Howard
yes, your deferring when you pay your taxes to when you think you'll be in a lower tax bracket. for most people that will be in retirement, when they don't make employment income anymore.
I don't see why you think keeping your retirement fund locked up is a bad thing. unless you have a specific purchase planned then you should be leaving the majority of your investments untouched anyways.
Jaxson Foster
who the fuck is able to run a 401k you would die of exhaustion
Parker Clark
If I do 4685 a month for 30 years at 4% annually (is this conservative enough?) I end up with 3.2mil, of which *.04 withdrawal rate is 128k. But the next tax bracket is 191k and I doubt I'll ever make that much in my career.
It's just I feel if it doesn't matter, couldn't I just use that money to invest in the same funds I would do if I had a 401k but instead keep it liquid in case I want to get a mortgage or start a company? (I know you can take a loan against your 401k for mortgage but it seems more hassle than if I had it in cash)
