Skip to main content
No. of Recommendations: 0
I'm 33 years old, currently maxing out pretax contributions to 401(k), and fully funding my Roth IRA. It seems like the next place I put money should be either after-tax contributions to 401(k) or a regular brokerage account. As I understand the options:

1) Growth of 401(k) contributions would be tax-deferred, but eventually taxable as regular income.

2) I lose the tax-deferred advantage if I go with a brokerage account, but when I do pay taxes, it's at the lower capital gains rate. Moreover, if I stick to LTBH, I effectively defer taxes anyway. (Well, I defer captital gains. I suppose I still pay taxes on any dividends.)

Also, the rep from my 401(k) company told me that if I leave my current employer before retirement (seems likely at my age!), the after tax money (contributions and gains?) can't be rolled over to an IRA or a new 401(k). Instead, the gains on the after tax money will be taxed and I'll get a check for the value of the after-tax account minus the withheld taxes. Does this sound right?

I'm happy with my 401(k) investment choices, and I like the ease of automatic paycheck deductions. But based on the full picture, it seems like the brokerage account is the way to go. Does it sound like I'm on the right track? When would someone want to make after-tax contributions to their 401(k)?

Thanks for your thoughts,
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
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.
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.