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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Re: Savings question - where to put it Date: 2/21/2014 2:34 PM
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(based on your wording it seems like you would advise OP against the idea of after-tax contributions to her 401k too).

Correct. I find it too much work and not enough benefit to do such gyrations.

To clarify, my suggestion is to check the option of doing a back-door Roth contribution by putting money into a traditional IRA (not mentioned originally) and converting to Roth IRA. With the contribution limits of the IRAs, she would still have funds to save in a taxable account.

Thanks for the clarification as I was not understanding that this was your suggestion. That said, I don't care for this suggestion either. I keep going back to not understanding the motivation to stuff everything into a tax-deferred retirement vehicle because it locks too much money in those accounts that you cannot access until 59 1/2 without paying a penalty to get to your own money. Given that the funds are after tax anyhow, I would much prefer to just leave them that way and maintain the flexibility of being able to use my own money whenever I please for whatever I please without having to worry about paying a penalty for the privilege.

I think that if you are investing for capital gain, you're better off to pay the capital gains tax rate in a taxable account than what will probably be higher ordinary taxes when you take money from an IRA.

There is nothing magic about a retirement savings account that requires all retirement money to be in one. You can still use your taxable account for retirement money later.

As far as the back-door Roth conversion, there are rules around that as well if you have other funds in a Traditional IRA, but someone else will have to spell those out. I do know that it is not falling off a log to do this conversion, and there can be other tax ramifications.

It just seems to me that all these gyrations are not necessary. Just leave after-tax dollars in a taxable account, and invest as part of the entire portfolio.
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