{ "media_type": "text", "post_content": "Does contributing to 401k beyond the match make sense? You can’t touch it until you’re 59.5. If i were to invest on my own in various etfs Ill pay the 22% tax upfront and then cap gains would be 15% when i sell. I’d have freedom to use that money to invest in real estate. when i pull my yearly salary out in retirement I’d Atleast be in the 22% bracket if not higher. Since the last 3 dem presidents have increased spending like crazy i expect massive tax hikes in the future. Am i wrong?", "post_id": "61affc5e86893e0033db47ee", "reply_count": 34, "vote_count": 5, "bowl_id": "59064a3cb12379001006592c", "bowl_name": "Personal Investment Chatter" }

Does contributing to 401k beyond the match make sense? You can’t touch it until you’re 59.5. If i were to invest on my own in various etfs Ill pay the 22% tax upfront and then cap gains would be 15% when i sell. I’d have freedom to use that money to invest in real estate. when i pull my yearly salary out in retirement I’d Atleast be in the 22% bracket if not higher. Since the last 3 dem presidents have increased spending like crazy i expect massive tax hikes in the future. Am i wrong?

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There are ways to access your retirement money early. Look up Roth contribution ladder. So you don't actually need to wait until 59.5 to withdraw your money penalty free if you end up retiring at say 50, for example. But yeah if you have short term spending goals like buying a home, you probably want to put that in a brokerage or HYSA depending on how soon you need it.

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You can take funds out early via Roth conversion ladder

You have a lot of assumptions in your thinking. You likely aren’t going to need to pull your full salary out in retirement due to the fact a large portion of your salary is probably going to investments. 401k and taxable account aren’t your only option. Do you have an IRA and HSA? There are many ways to get money out before 59.5 if you retire early. If you want flexibility your plan is OK but up to you what you want to do.

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Yup that’s why i feel more comfortable with Roth. It’s not short term need per se. But in the next 5-6 years we’d expect to be parents and in need of upgrading from our smaller townhome.

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Hate to break it to you but all administrations have increased spending. Not a democrat only phenomenon

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💡💡💡💡💡💡

In addition to the above, expected tax hikes are a further incentive to max out Roth accounts (both 401k and IRA).

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Once you roll it over to an Roth IRA, then you can get your contributions

I’d question the source of tax increases. I’d expect tax increases for social programs vs debt. Most of the debt is owed to the people. Using taxes to pay it down is like stealing from the working class to pay for recoveries that benefited the wealthy disproportionately. Looking at the root causes of spending increases is as important as the legislation. Take the current plans. If investments have a positive return to the economy, then the debt is a good investment. Think of it like a mortgage where you’re also the bank.

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Say you’re 30 and you put $10k in brokerage instead of Roth 401k. In 20 years (age 50) you liquidate and it’s worth $60k (~10% annual return) and you’d pay 15% tax on the $50k of gains for $7,500. You could convert Roth 401k to Roth IRA and take out all but $10k and pay $0 tax. So it would cost you ~$7,500 for every $10k you do this with.

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ASM - my understanding of tax code is there is a 5 year waiting period to access any rollover money sent to a Roth IRA without penalty. After that I think you can fully withdraw it without penalty as if it were a normal contribution.

Compounding interest is the most powerful force in the universe. Stack in tax advantaged accounts, always

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If you can contribute to Roth 401k all of your gains are not taxable so you can contribute less, have more in retirement

The traditional 401k also has the advantage of the current deduction. If your rate now and in retirement are about the same the results should be pretty similar

You can get at 55 under most circumstances

Age 54; the calendar year in which you turn 55

If your taxable brokerage produces dividends you’re still paying taxes on that

If you are relatively young, and have other plans for the money within 10 years then you probably aren’t wrong. Roth probably better than brokerage though, as you can withdraw contributions.

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