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Subject:  Re: Taxable vs tax Defered Date:  9/7/2001  2:07 PM
Author:  jmjkon Number:  31860 of 88522

jrr7 writes:You have to choose between "keeping all the years of compounding" and "being cushioned against a 25% loss right before you were about to retire" (which is the goal of the REHP thinkers)

JK adds: Yeah, thats the main question I'm struggling with a little bit here. I believe I will go forward with my plan to invest at least some of my retirement money on an after-tax basis because I don't want to have all my eggs in one basket.

Don't get me wrong, I'm still contributing to my 401k past my employers match, so I'm getting all of that "free money". But I really have seen that many early retirees have wished they had more after-tax equity investments to draw from, I guess so that they could pay lower taxes on those withdrawals.

It makes some sense to me, although the risk there is that, as always, the market could drop suddenly and stay there right as you were counting on that money. So I believe that if I have both after-tax as well as a 401k to draw from in retirement, I could draw from the after-tax account when the market was up to take advantage of the lower capital gains tax rates. When low, I could take my withdrawals from the 401k.

Does that sound reasonable/sane? I guess I'm also assuming that I would have enough cash/CDs in my 401k to sustain at least 4-5 years of steady, stable living expenses, so that if I didn't have to draw from the aftertax account if I didn't have to.

Anyway, just thinking out loud, since I have at least 29 years to go! But all thoughts are appreciated, thanks in advance-


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