What is 401K

[farmadiazepine]

You can Google it.

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[confettiflyer]

I am planning to max out my 401 k tax saving by cashing out my 401 k by age 55. The new law allow you to cash out at 55 and not pay a penalty.

Start to cash out by age:

401 k: 55
Roth IRA: 59
Social Security: around 65
HSA: whenever I need it

This means I need to: (1) have a lot of saving; (2) maintain my health; (3) income from rental properties

Do you have a long expected lifespan (like your parents/grandparents)? Consider delaying SS until age 70 or whatever the maximum age is then, the increased payout acts as if your basis has a 6-7%/yr return each year you delay.

 

[pezdispenser]

Doesn't matter, you can't shield your cap gain/dividend/interest from being taxed every yr unless you put it in retirement account. Money in there (Roth 401k or traditional 401k) always grows faster than in taxable account due to that simple fact. The difference is quite significant over 40 yrs getting compund interest on interest that you'd otherwise pay to Trump.

It was really only meant to be used when comparing a 401k with a Roth IRA or Roth 401k. Of course if you compare any of those to a taxable account, the taxable account is worse off. This is what I meant:

401k
Contributions: 0% tax (saved 28%, may even dip down into 25% bracket)
Withdrawals: ~20% tax (assuming tax brackets don't go up)

Roth IRA or Roth 401k
Contributions: 28% or 25%
Withdrawals: 0% (it's also not included as income on your tax return so won't affect things with income limits)

So the 401k is better in most cases, but not massively better than the Roth. People like us usually max out both anyway $18k 401k + $5500 Roth IRA.

 

[wagrxm2000]

People think they will be taxed less during retirement? I'm pretty sure we will be in a higher bracket with the amount we save. I'm looking at a minimum of 200k using the 4% rule (yes I predict at least 5 million saved by the time I retire as a minimum) Obviously tax brackets will be raised with inflation or just raised anyways but I definitely won't be in the lower bracket.

 

[BMBiology]

People think they will be taxed less during retirement? I'm pretty sure we will be in a higher bracket with the amount we save. I'm looking at a minimum of 200k using the 4% rule (yes I predict at least 5 million saved by the time I retire as a minimum) Obviously tax brackets will be raised with inflation or just raised anyways but I definitely won't be in the lower bracket.

If you can, retire at age 55. New law allow you to withdraw from your 401 k and pay no early withdraw penalty if you stopped working at age 55, instead of 59 1/2.


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