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Subject:  Re: IRA vs. HSA? Date:  12/7/2004  11:24 PM
Author:  yobria Number:  43460 of 87994

Preferred treatment of long-term capital gains makes taxable accounts more attractive for buy-and-hold (for at least a year) investments than it used to be.

Except in extreme cases, many hours of Excel analysis on my part shows the retirement account will always beat the taxable account. The tax free contribution and decades of tax deferred growth of IRAs and 401ks far overwhelm the lower cap gains rate.

Even if you have poor 401k investment choices, you'll be parting ways with your employer eventually (I recall reading the average US job lasts 4 years), and will then have decades to invest as you see fit after you roll over the 'k. Even if you're sure you'll never leave your job, you can lobby your employer for a better plan...competition is fierce and the average plan is getting better every year. Many 401k plans offer better choices than you could get independently- my girlfriend's plan, for example, offers institutional class Vanguard funds with far lower fees than you could get with a Roth IRA.

I would never favor a taxable account over a 401k unless I was certain I would be at that employer for decades, the 401k choices were truly horrible, and I was sure they'd never improve. Of course the Roth is a good alternative, but $3k/year isn't going to result in much of a retirement nest egg- you must max out the 401k in my opinion.

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