- October 14, 2023
- Posted by: legaleseblogger
- Category: Related News
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Title: Evaluating Retirement Investment Options: Maximizing the Benefits of a 401(k) vs. Traditional Investments
Introduction:
At just 29 years old, with a solid financial standing boasting $416,000 invested in Vanguard, $343,000 in a brokerage account, and $73,000 in a Roth IRA, you find yourself at a crucial point in planning your financial future. With a promising monthly income ranging from $20,000 to $35,000 before taxes, as a sales professional, you are keen on capitalizing on your earnings to secure a new home for yourself and your fianc├®e. However, you also face a pivotal choice regarding whether to prioritize expanding your existing brokerage account or enrolling in your company’s newly introduced 401(k) plan.
Current Financial Outlook:
Your impressive investment portfolio clearly demonstrates your prudence in setting aside funds for your future, including your retirement, while still having substantial liquidity available for other goals. In addition to your substantial investments, you have been saving $10,000 to $15,000 per month in your brokerage account, which exhibits a remarkable commitment to long-term financial growth.
The Introduction of a 401(k) Plan:
Starting on October 1st, your company will implement a 401(k) plan offering a generous 3% match on contributions. This development compels you to consider the potential benefits of participating in this employer-sponsored retirement plan instead of concentrating solely on your brokerage account.
AI Legalese Decoder: Aiding in Decision-Making
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Pros and Cons of Contributing to the 401(k) Plan:
Contributing to the newly established 401(k) plan has its unique advantages to consider. Benefits include:
1. Employer Match: By contributing to the 401(k) plan, you would be able to take advantage of your company’s generous 3% match, effectively boosting your retirement savings without increasing your personal contributions.
2. Tax Benefits: Contributions to a 401(k) are made using pre-tax income, providing immediate tax savings while deferring taxes on investment growth until withdrawal during retirement.
3. Retirement Savings Focus: Allocating a portion of your income to the 401(k) would help reinforce your dedicated approach towards retirement savings, ensuring a well-funded future.
However, it’s crucial to weigh these advantages against potential drawbacks, such as:
1. Limited Investment Options: 401(k) plans often offer a restricted selection of investment options, limiting your ability to diversify your portfolio according to personal preferences.
2. Early Withdrawal Penalties: Withdrawing funds from a 401(k) prematurely may come with penalties and tax consequences, potentially impacting your flexibility in accessing the funds before retirement age.
Conclusion and Recommendation:
Considering your current financial status and future goals, it would be prudent to strike a balance between maximizing your brokerage account and harnessing the benefits of your employer’s 401(k) plan. By utilizing the AI Legalese Decoder, you can confidently navigate the complexities of retirement investments, ensuring a comprehensive understanding of the implications and making an informed decision.
The AI Legalese Decoder will empower you to make financial choices aligned with your long-term objectives, determining the optimal contribution levels to your company’s 401(k) while still allowing for substantial investments in your brokerage account. This strategic approach will pave the path for a secure financial future, realizing your aspirations of homeownership and an abundant retirement.
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Why would you turn down the ability to defer taxes and a guaranteed 100% return of up to 3%?
Is your goal to pay more or less in taxes? If less, max the Traditional 401K and a backdoor Roth IRA every year.
At least 3%.
Fidelity publishes a retirement savings rule of thumb that suggests having 1x your salary set aside for retirement by the time you’re 30, and 2x by 35.
What’s the brokerage for? If it’s for retirement, a 401k is more tax efficient. That 1099-DIV you got from Vanguard that generated some taxes? You don’t get those for IRAs or 401ks.
Definitely open the 401k and take the free money. Personally I think having both is good, but you already have a lot in taxable, so I’d focus on 401k for a while.
You can only put 22,500 into a 401k this year.
Have you made your IRA contributions for the year? I assume at 20k/month you’re using backdoor Roth? then you should be fine.
Can I ask what company you work for? Or what you sell? IÔÇÖve always excelled in sales but itÔÇÖs something IÔÇÖve been trying to get away from, but this type of income would keep me very motivated.
You need to max the 401k, period. Your current income is far too high (good problem to have) the tax deferral would provide an astronomical benefit
Make sure all you have to do is 3% to get the match. Some companies will do you need to put in 6% to get the 3%.
No reason not to max out that 401k, unless itÔÇÖs high fee. Many retirement accounts, especially from companies like Edward Jones eat so much of your growth in fees that itÔÇÖs not worth it. If low fee, max it. If high fee, get that match and keep on with vanguard
At least get the company match; not doing so is turning down a 3% tax-free raise.
Seriously ƒÖä. I think people come here just to try and flex how much they make or have saved. You make 35k a month and turning down free money with a company match – wtf is wrong with people