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> I would only add the caveat that you should ONLY invest in 401K IF you company is matching. I think this is NOT good advice. Reasons: * the more you invest

by pm90 9y ago

> I would only add the caveat that you should ONLY invest in 401K IF you company is matching. I think this is NOT good advice. Reasons: * the more you invest in your 401(k), you reduce your tax bracket * you can invest more money since its pre-tax. The caveat being here that you will be taxed when you withdraw. Usually its a worthy tradeoff * you still have the option of directing your money in Vanguard or Vanguard like ETF's since you are in control of where your 401(k) money goes IANAL so let me know if what I said is factually incorrect.

dragonwriter 9y ago
> the more you invest in your 401(k), you reduce your tax bracket Reducing your tax bracket isn't meaningful separately from the next item; the idea that it is comes from a misunderstanding of progressive taxation. > you can invest more money since its pre-tax. The caveat being here that you will be taxed when you withdraw. Usually its a worthy tradeoff For most people, yes (probably, though obviously this depends on future tax policy and other future events), but this is not universally the case. > you still have the option of directing your money in Vanguard or Vanguard like ETF's since you are in control of where your 401(k) money goes Depends on who your employer has managing the 401k and what they offer. This varies a lot.
- bradlys 9y ago
  Regardless, you should always max out 401k and IRA every year. Because you only get taxed with those once, it's better. Investing your after tax income into something that will get taxed /again/ is not optimal compared to 401k and IRA.
  - brianpgordon 9y ago
    It may be better in some cases to hold onto the cash rather than locking it up in a retirement account in order to build up a cash buffer and avoid the penalty for an early withdrawal in case of emergency expenses.
    - bradlys 9y ago
      Sure, but I'm not assuming such weird scenarios. You're supposed to have your emergency fund completely built up before you save for retirement.

by pm90 9y ago

dragonwriter 9y ago

> the more you invest in your 401(k), you reduce your tax bracket Reducing your tax bracket isn't meaningful separately from the next item; the idea that it is comes from a misunderstanding of progressive taxation. > you can invest more money since its pre-tax. The caveat being here that you will be taxed when you withdraw. Usually its a worthy tradeoff For most people, yes (probably, though obviously this depends on future tax policy and other future events), but this is not universally the case. > you still have the option of directing your money in Vanguard or Vanguard like ETF's since you are in control of where your 401(k) money goes Depends on who your employer has managing the 401k and what they offer. This varies a lot.

bradlys 9y ago
Regardless, you should always max out 401k and IRA every year. Because you only get taxed with those once, it's better. Investing your after tax income into something that will get taxed /again/ is not optimal compared to 401k and IRA.
- brianpgordon 9y ago
  It may be better in some cases to hold onto the cash rather than locking it up in a retirement account in order to build up a cash buffer and avoid the penalty for an early withdrawal in case of emergency expenses.
  - bradlys 9y ago
    Sure, but I'm not assuming such weird scenarios. You're supposed to have your emergency fund completely built up before you save for retirement.