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The Issue With a Traditional 401k or IRA
When it comes to retirement planning, many people turn to traditional 401k or IRA accounts as their primary savings vehicle. However, there are several issues with these options that can impact your ability to retire comfortably.
One of the biggest issues with traditional 401k and IRA accounts is the potential for market volatility. These accounts are typically invested in a mix of stocks, bonds, and other securities, which means their value can fluctuate greatly based on market conditions. This can be particularly worrisome as you near retirement age and have less time to recover from any significant market downturns.
Another issue with traditional 401k and IRA accounts is the tax treatment of withdrawals. With a traditional 401k, contributions are made with pre-tax dollars, meaning that you don’t pay taxes on the money you put in. However, when you withdraw funds in retirement, you’ll have to pay income taxes on the full amount. This can significantly reduce the amount of money you have available to support yourself in retirement.
Similarly, with a traditional IRA, contributions are also made with pre-tax dollars, and withdrawals are taxed as ordinary income. This can be a significant issue for retirees, especially if they are in a high tax bracket during retirement.
Additionally, traditional 401k and IRA accounts have required minimum distributions (RMDs) starting at age 72. This means that once you reach this age, you are required to withdraw a certain amount of money from your account each year, whether you need it or not. This can impact your tax situation and potentially push you into a higher tax bracket.
Finally, another issue with traditional 401k and IRA accounts is the lack of flexibility when it comes to accessing your money. With these accounts, withdrawing funds before age 59 1/2 can result in early withdrawal penalties of 10% in addition to income tax. This can be especially problematic if you need to access your savings for unexpected expenses or emergencies.
So what are the alternatives? Many people are now turning to Roth 401k or IRA accounts, which offer tax-free withdrawals in retirement and greater flexibility for accessing your money. Another alternative is to consider other investment options outside of traditional retirement accounts, such as real estate, individual stocks, or mutual funds.
In conclusion, while traditional 401k and IRA accounts have long been the go-to option for retirement savings, they do come with several potential issues that can impact your retirement outlook. It’s important to carefully consider all of your options and work with a financial advisor to develop a retirement plan that best meets your needs and goals.
That's only up until your full retirement age. Please stop fear mongering
I cashed it out at the age of 53. I set up residency in Florida which does not have personal income tax. Paid the penalty and bought property by the water in cash. With that said, I have no mortgage and it feels like I hit the lottery. Lottery. I make one quarter of what I used to make when I was fully employed. I have zero debt and live very comfortable. Don't let these fools tell you you have to stay on the treadmill and keep feeding the bankers. The markets are manipulated. Anyway. Get out while you can and enjoy your quality of life. I told my sons forget the 401k, take a quarterly percentage of your income and put it towards physical precious metals. I would have had five times the amount of what my 401k was. Don't get stuck in the racket because you're just a sucker to them.
Luckily 100% of my retirement contributions are Roth IRA/ Roth 401k
This is why people need to be financially literate.
ROTH 401K
Payoff your home, do roth conversions
That's why you move to a state that doesn't tax 401k or any income at all. Can't complain if you live in a state with high taxes.
Problem with 401k? Lmao more like problem with social security. Social security is bullshit and you shouldnt rely on it anyway. Is it still going to be around in 30+ years?
These mfers tax you for SS, then they tax you again when you use it. They tax you again when you spend it. Taxation is theft, and the thieves spend more than they get driving you and your kids and their kids further into debt. It prob wouldn’t be so bad if we had a surplus and we could see our money working for the people. Get rid of all unnecessary spending, big social programs, proxy wars etc. make congresses jobs dependent on a balanced or surplus building budget. Once that’s fixed, then go to a flat tax say 10-15%.
So what do it do
Social security! Lol!
lol rookies. I took all my 401k money out when I was 30 lol.
Maybe taxes should just get lost along with the thieves creating this trash system
So what do I do with my 401k?
Maybe let’s admit that the tax system in flawed and we as taxpayers are getting screwed by the government.