While no situation is the same, should you only invest in a 401k?
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When it comes to investing for retirement, most people rely on their employer-sponsored 401k plan as their primary investment vehicle. While a 401k can be a useful tool for long-term retirement savings, it is important to consider whether relying solely on a 401k is the best approach.
First, it is important to understand the limitations of a 401k account. These plans have contribution limits, which in 2021 are $19,500 for those under age 50 and $26,000 for those 50 and over. This means that you can only save a certain amount of money in your 401k each year, which may not be enough to fully fund your retirement.
Additionally, 401k plans have limited investment options. Most plans offer a selection of mutual funds to choose from, which may not provide the diversification needed to minimize risk and maximize returns. It is also important to note that 401k plans often have high fees, which can eat into investment returns over time.
For these reasons, it is wise to consider alternative investment options outside of a 401k plan. One option is to open an individual retirement account (IRA), which offers more investment options and may have lower fees. IRAs also have higher contribution limits than 401k plans, allowing you to save more money each year.
Another option is to invest in taxable accounts, such as brokerage accounts or real estate. While these investments do not offer tax benefits like a 401k or IRA, they can still provide opportunities for growth and income. It is also important to note that having a mix of tax-deferred and taxable accounts can provide flexibility in retirement to manage taxes and withdrawals.
Ultimately, the best approach to investing for retirement is to have a diversified portfolio that includes a mix of investment vehicles. While a 401k can be a useful tool, it is important to consider the limitations and explore alternative investment options to ensure you are maximizing your retirement savings. Consulting with a financial advisor can help you develop a comprehensive retirement plan that fits your unique needs and goals.
If you’re gonna put it all in a 401k. Do it in a ROTH 401k
Younger people should do about 60/40 in 401K and a ROTH. You will want the tax savings now and the ROTH gives you more flexibility in taxes later. You likely want the retire at 55 age option most 401K offer, IRA's will make you wait till 59 1/2. If you are a high earner, say 150K now, you need to talk to a financial planner and a CPA to figure it out. WHen it comes to deciding how to invest within any of these accounts, most should just stick with mutual funds, no actively managed funds or individual stocks and bonds. They are very low maintenance and offer a lot of diversity with just 3-5 funds.
Please please make a video where all these scenarios are included with people who will be getting a pension
Waking up everyday to see my withdrawals successful notifications on my mail is the best thing I have ever wished for myself. Another great withdrawals today!! Really appreciate what you've done for, you're the best and I promise to spread your good works thank you Frederick Kurt
Wait Eric I am almost 52 how can I retire at 50…. Sounds difficult! But I definitely like the idea.
But what if the market
Many places also have a Roth 401(j). The big advantages of 401(k) are a) higher limits and b) greater protection against creditors.
Anything beyond the 401K match just feels like an unnecessary future tax burden. I would rather maxed out a Roth IRA and then anything left over in a normal taxable account.
Thanks Eric
Nice job, Eric!