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

Discussion in 'Business, Careers & Education' started by Troll2, May 26, 2012.

  1. Piobaire

    Piobaire Not left of center?

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    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.
     


  2. Pennglock

    Pennglock Distinguished Member

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    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.
     


  3. Piobaire

    Piobaire Not left of center?

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    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.
     


  4. Troll2

    Troll2 Well-Known Member

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    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.
     


  5. asdf

    asdf Senior Member

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


  6. SkinnyGoomba

    SkinnyGoomba Stylish Dinosaur

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    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.
     
    Last edited: May 29, 2012


  7. stevent

    stevent Distinguished Member

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    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
     


  8. mkarim

    mkarim Distinguished Member

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    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.
     


  9. SkinnyGoomba

    SkinnyGoomba Stylish Dinosaur

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    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?
     


  10. GreenFrog

    GreenFrog Stylish Dinosaur

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


  11. Nereis

    Nereis Distinguished Member

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


  12. SkinnyGoomba

    SkinnyGoomba Stylish Dinosaur

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  13. chogall

    chogall Distinguished Member

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


  14. otc

    otc Stylish Dinosaur

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    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)
     


  15. gettoasty

    gettoasty Stylish Dinosaur

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

    403(2)(b) :smarmy:
     


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