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Author: Zweiguy Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75381  
Subject: Re: You don't need a 401k- Just tax management Date: 11/30/2003 1:05 PM
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Nick you posted: If the 100K goes into a taxable account, you lose $25,000 off the top..

Like Jess, I don't see how you came up with the idea that you some how lose $25K "off the top." You start out by saying $100K goes into a taxable account...that's implies the $100K is AFTER tax money. How do you lose $25K? And did you calculate the taxable account based upon $75K earning 6% (since this is the after-tax return)?

Conclusion: A tax sheltered account is better than any taxable account.

I'm certainly not the brightest bulb on the tree, but that is a faulty conclusion. It may be true for the theoretical set of circumstances in your calculations, but Real Life [tm] can/will alter you results in several situations...it depends...

Perhaps like 401k plans requiring company stock (Enron/Worldcom), or a plan that limits your options to a GIC, or doesn't permit brokerage options, or has severe brokerage transaction fees.

Tax sheltered plans CAN certainly outperform in situations where the company "matches" or the funds you're in become the next Magellan.

ZG (who maximizes his 401k contributions every year, but wishes his brokerage option was Scottrade)
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