Is putting pre-tax money into 401k or setting aside after-tax money better? After-tax money is set aside in an Amex account that it's less easy to withdraw and earns about 0.9% interest income.

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depends on your current tax rate and if you expect it to be higher or lower when you withdraw the money

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Set aside.enough in cash to.have an emergency reserve (that amount will vary by person). Then split the rest between 401k and Roth IRA for tax diversification and tax free compound growth. Make sure to hit your match limit on the 401k first, free money there.

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You place into a normal IRA and then immediately convert it over to a Roth. The quicker the better. It's really not that shady. Perfectly legal

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Money you don't see you won't spend ;)

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^ tell me how

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Pretax lowers your taxable income and you're not taxed on 401k. You're getting taxed on after- tax plus the interest earned in the Amex savings. Whether its better depends on your tax situation.

I'm aware of the tax treatment different between the two. I guess I just want opinions on the risks or just general comments on having the cash available to you (yet set aside) vs putting it in 401k.

To expand on the above comment, 401k is the best option in theory as you will almost certainly be making less during retirement (where you can them withdraw the money and get taxed at a lower rate). Try not to borrow from it as that comes with a penalty (they'll withhold the tax and then some as the distribution could bump you into the next tax bracket. Also, don't take any early distributions if you have/want to work well in to your 60's as you will be in a high tax bracket there too.

Most people benefit from contributing to their 401Ks first. Personally I max my 401K and Roth IRA, so I have a healthy combo of pre and post tax savings. (However, due to income limitations for Roth IRA, that vehicle won't be available to me much longer though) If you have to choose, 401k is GENERALLY the better vehicle.

You can get around the Roth income limitations

Google backdoor Roth. Seems a bit shady to me, but I know people who've done it.

Do you have a Roth 401k option? I do about half and half between trad and Roth 401k. I consider it tax hedging- don't know if rates will go up or down. Regardless all of your unemployed high school classmates will vote to take it all to punish you for your responsibility. More than half of Americans have less than $1k in savings and a huge percent of millennials are communists (see Bernie.)

It's either (1-t)*(1+i)^n or ((1+i)^n)*(1-t). Bottom line is it doesn't matter unless you have information as to what your future tax rate will be relative to your current tax rate.

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