Convince me to max my 401k

[disneysteve]

Substantially Equal Periodic Payments (SEPP) is the rule 72t. It's useful, but not ideal.

Many don't realize that rule 72t lets you start taking distributions early but the allowed amount is based on your life expectancy. Well at 55, your life expectancy might be 30+ years and the amount you can draw out may be minimal, not nearly enough to meet your needs.

[riverwed070707]

tying it up? No. Taxable is very flexible. Now if you have a Roth 401k it might make sense for someone like you. You could end up in a higher bracket in retirement...

I do have an option for a Roth 401k. Honestly never even considered it. I know its not rational but it just feels like my contributions go so much less far when they have taxes take out first haha

[corn18]

I do have an option for a Roth 401k. Honestly never even considered it. I know its not rational but it just feels like my contributions go so much less far when they have taxes take out first haha

That'll change when you go to take out that tax free money. I hate my 401k now because it is all taxable withdrawals. I need to get it all out before 72 @ 12%/15% tax. The withdrawals will be taxed @ 22% once RMDs start due to my SS and pension. It worked out great, though, because it went in when I was in the 39% tax bracket, so the tax arbitrage is good.

[HundredK]

I do have an option for a Roth 401k. Honestly never even considered it. I know its not rational but it just feels like my contributions go so much less far when they have taxes take out first haha

Well, don't forget that in a Roth 401k, your money grows tax-free. It's not like a normal taxable account where you'd pay additional taxes on the growth. So it kind of makes up a bit for that pinch you feel on the front end. Less in initially post-tax, all out tax free at the end.

[LivingAlmostLarge]

but the roth 401k only makes sense depending on your bracket see corn and where you plan on being. I also max out DH 401k and then max out backdoor roth even with our bracket. Our bracket still was 35% -37% was it worth it? I think so because the future tax sheltering. Even if we saved the $25k into a taxable account we'd be hit on the back end on gains. At least this way we can save on $25k/year back end gains. So it's all a sleight of hand. You end up paying the piper if you are responsible.

I've come to that realization. Was it smart to save for the kiddos college? I don't know but I did. So well no financial aid.