Should I Max Out My 401K? Part 2

401K plans have tax benefits over taxable accounts due to their contributions and gains being only taxed upon distribution. Having a lower tax bracket in retirement amplifies this tax advantage. Unfortunately the drawbacks of 401K plans are typically high fees and low performance (1 and 2). When factoring both the positives and negatives of 401K plans is it better to invest in a 401K plan or fund a taxable investment account. The ProFolio 401K calculator was designed to help you answer this question. Fill in the calculator form with your specific situation and it will help you decide which investment is the best investment for you.

According to the calculator inputs shown in the form, a taxable retirement account worth $697K at retirement yields the same amount of after tax retirement income as a 401K account worth $972K.

1)https://www.americanprogress.org/issues/economy/reports/2014/04/11/87503/fixing-the-drain-on-retirement-savings/

2)http://corporate.morningstar.com/US/documents/ResearchPapers/MorningstarActive-PassiveBarometerJune2015.pdf

 

Disclosure:

The information presented here is the opinion of the author and may quickly become outdated and is subject to change without notice. All material presented in this article are compiled from sources believed to be reliable, however accuracy cannot be guaranteed. No person should make an investment decision in reliance on the information presented here.

The information presented here is distributed for education purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or participate in any particular trading strategy.

Performance data showing past performance results is no guarantee of future returns.

Featured Posts
Recent Posts
Archive
Search By Tags
Follow Us
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Social Icon