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>If you put 100k into a bank account, it will earn nothing and taxes will eat you alive. Huh? Assuming this is all after-tax money and isn't earning anything,

• massysett 10y ago
  You pay taxes when you earn the money as salary, pay taxes on the interest. With a 401k, you pay no taxes when you earn the money as salary, and the earnings compound tax-free. A bank account is the absolute worst place to park any significant amount of money. The only reason it's better than a mattress is you don't have to worry about the bank catching on fire.
  • zaccus 10y ago
    You pay taxes when you withdraw from a 401k, and the IRS has minimum distribution requirements that ensure you will pay taxes on all that money at some point. Personally I think a Roth IRA is the better deal from a tax standpoint -- pay taxes on contributions and then you're done. With a long enough time horizon and a little luck those contributions will be dwarfed by earnings, and I would rather pay taxes on the lesser amount. A savings account earning >=1% interest is a negligible tax burden. What you lose from inflation is far greater than what you pay in taxes. Even so, saying it's "the absolute worst place" to put money is beyond hyperbolic.