What is a good reason to NOT max out a 401k?

[Piobaire]

Two thoughts about things:

1) Higher taxes when we're in retirement. I think, Republicans aside, taxes in the US are headed up in the long term. I hope it won't hit income tax too much, and will be centered in a VAT, but it seems neither side of the aisle dislike the VAT and the likely result will be higher income taxes over the next 20-40 years.

2) Future changes to tax law removing/mitigating current tax advantages. First one I could see is the Roth getting made taxable. There is going to be a need to raise ever more tax revenues and hitting retirement funds might be too tempting for D.C. not to impinge on.

 

[Pennglock]



2) Future changes to tax law removing/mitigating current tax advantages. First one I could see is the Roth getting made taxable. There is going to be a need to raise ever more tax revenues and hitting retirement funds might be too tempting for D.C. not to impinge on.

Ive always considered these to be pretty much untouchable. If there is anything that could start a tax rebellion in the US, it's hitting the old folks' retirement funds.

Means-testing the "1 percenters," I guess I could see that though. Something like a special rate for people with over $5 million in funds or something.

 

[Piobaire]

2) Future changes to tax law removing/mitigating current tax advantages. First one I could see is the Roth getting made taxable. There is going to be a need to raise ever more tax revenues and hitting retirement funds might be too tempting for D.C. not to impinge on.

Ive always considered these to be pretty much untouchable. If there is anything that could start a tax rebellion in the US, it's hitting the old folks' retirement funds.

Means-testing the "1 percenters," I guess I could see that though. Something like a special rate for people with over $5 million in funds or something.

Here's the thing...all the talk is about the 1%, but when you listen to people like Obama, Pelosi, et al, it gets dragged down to families at 250k. Wondering off topic but I bet means testing for Medicare, phasing out SS payments, etc. kick in at some point too.

 

[Troll2]

After giving my own OP some moar thought, another point is that it really depends on your asset allocation. If you want to invest heavily in bonds, the 401K is definitely the place to do it as you will not be paying income tax on your interest. Similarly, tax-free munis should be allocated to the taxable account.

 

[asdf]

Yeah, there is a similar allocation/location concern with regards to foreign assets subject to withholding taxes, at least in Canada.

 

[SkinnyGoomba]

Mind you there are a lot of fees assciated with 401k plans that really kill the return. Doesn't stop me frm contributing, but they rarely calculate that into your return. I use mine mostly for corp. bond funds.

 

[stevent]

I'm with asdf on this, my Roth IRA is maxed out, haven't really had 401k yet so depending on what my options are I would probably contribute if there was a good amount of matching

 

[mkarim]



Mind you there are a lot of fees assciated with 401k plans that really kill the return. Doesn't stop me frm contributing, but they rarely calculate that into your return. I use mine mostly for corp. bond funds.

Agreed. I put most of mine in money market funds and when I leave the employer, roll over into a Roth and invest in stocks I want. That way, I get the benefits of company match and not have to pay high 401K management fees.

 

[SkinnyGoomba]

I just looked at my YTD return today for my 401k, it shows 3.7%. However after you deduct the fees it is about 1.07%. The funds I've selected don't charge more then 1%. Great investment right?

 

[GreenFrog]

I wouldn't invest in money market funds.. the returns on those are ridiculous.. they're like 1 BP.. laughable.

 

[Nereis]



I just looked at my YTD return today for my 401k, it shows 3.7%. However after you deduct the fees it is about 1.07%. The funds I've selected don't charge more then 1%. Great investment right?

If you're investing into corporate fixed income, surely it'd return higher than a savings account?

 

[SkinnyGoomba]

It does, prior to the fees.

 

[chogall]

I just looked at my YTD return today for my 401k, it shows 3.7%. However after you deduct the fees it is about 1.07%. The funds I've selected don't charge more then 1%. Great investment right?

time to quit ur job or somehow roll ur 401k into ira.

 

[otc]

Yeah, not sure I get this.

Where are you finding these fees? Are these in addition to the fees paid on the funds?
I spent some time looking through mine and I am finding nothing like this (but maybe you have a nasty 401k administrator)

 

[gettoasty]

You should see the fees soon enough post - July 1.

403(2)(b)