No. of Recommendations: 0
The nice thing about IRA & 401K is the tax deferral. The bad thing is that you'll pay ordinary income tax rates on withdrawals. Plus the bit about not being able to easily take withdrawals until you are 59 1/2.


The nice thing about taxable accounts is that you pay capital gains tax rate on withdrawals. Also you can withdraw at any time. You also effectively get the same tax deferral as you do in an IRA/401k -- if you buy&hold.

I think the best savings order is:
1) 401k, only as much as you need to get the entire employer match.
2) Roth IRA.
3) VTI or VOO or SPY in taxable account(s)

When we were checking our accounts with a couple of FAs before we retired, they indicated that they saw a lot of people who had much more in retirement accounts than in taxable accounts, and this caused some difficulties in takng optimum withdrawals.
Print the post  

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement