I’m going to turn 55 this year and have 1.8m in my 401k and 380k in my mutual funds account. I’m thinking of retiring between 62 and 65. I currently contribute 32.5k yearly to my 401k and 36 k to my mutual funds account.My salary has decreased due to this economy and kids college are taking up quite a bit of money.
My question is, Is it worth it maxing out my 401k vs putting that extra money into my mutual funds account so that I increase my after tax money at retirement. I will also have access to a HSA account next year which I plan to take advantage of.
Advise on maxing out 401k
byu/ProduceDecent1248 inpersonalfinance
Posted by ProduceDecent1248
5 Comments
Tax advantaged dollars >>> taxable brokerage dollars for retirement, so no it wouldn’t make sense to reduce 401k contributions to increase taxable brokerage investing.
What about a Roth IRA? Do you have any post-tax retirement accounts?
401k calculator with 18% contribution on 150k salary with no match at 6% growth has you at 65 around 3.5mils. your gains if all goes well now…will outpace your contributions.
you could just like attack all your consumer debt and mortgage….build some cash reserves so if theres a downturn for some reason, your prepared then enter retirement with strong foundation.
Sure your “mutual funds account” is after tax, but it’s not the same “after tax” as say Roth. You’ll still be taxed on it. Your 401k not only skips those capital gains-type taxes, but it also comes out at a lower bracket in retirement more often than not. If you’re retiring at the age you plan, there’s no real point in prioritizing brokerage over tax advantaged.
Do you have a megabackdoor available? If so, makes sense to stop all taxable and get that maxed out. I know it’s less common but check your plan documents to see if it’s an option.