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URL:  http://boards.fool.com/why-no-moreive-maxed-out-my-401k-since-i-was-a-30552352.aspx

Subject:  Re: Beginning Retirement Investing Date:  2/20/2013  12:41 PM
Author:  sykesix Number:  71442 of 76090

Why no more?ive maxed out my 401k since I was a year older than the op and done quite well.

IIRC, the theory is that upon withdrawl 410(k)s are taxed as ordinary income which is typically higher than capital gains rates, so there is benefit to investing those dollars beyond the employer match outside the 401(k). In other words, if you don't contribute to the 401(k) beyond the match and invest somewhere else, you're betting that upon withdrawl you'll get taxed at the 20% long term capital gains rate instead of the roughly 25% income tax rate you're paying right now. If that's the way it actually works out, then that's the smart thing to do.

However, IMO the ease of investing in a 401(k) is worth a lot. Savings that happen automatically are good. Plus they are pre-tax dollars, which means you have the ability to contribute more dollars than you otherwise could.

Also for planning purposes, it is a reasonable assumption (but impossible to say for sure) that your tax rate in retirement will be lower than your tax rate while working. It is entirely possible that your income tax rate will be lower than the capital gains rate. In that case, you screwed yourself by not contributing to the 401(K). So there is a bird-in-the-hand advantage to getting tax savings right now as opposed to a theoretical savings later.

My advice is max out your 401(k) and your Roth, and put as much as you can into a regular investment account. Remember how much you paid for this advice.
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