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I have yet to see a 401k with options that are attractive to me or those who have reviewed their plans with me.

There are good plans out there, even some that include brokerage options. At Fidelity, they call it Brokerage Link https://www.brokerage-review.com/ira-account/401k/fidelity-b... I'm pretty sure that ETrade and Schwab, among others, also offer this as an option. Of course, the company sponsoring the plan has to choose this option to offer to their employees.

AJ
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No. of Recommendations: 2
Both mine and my wife’s companys offer 401ks but they do not match.
I am aware of the tax shelter they provide . HOWEVER, I have chosen to opt out and invest into the portfolios that I have created which give me more room to invest as I please in the companies I want with no withdrawal penalties.My goal for these accounts is LONG TERM

Any thoughts????? are GREATLY APPRECIATED


401(k)s do offer a good tax break, or if they offer the option for a Roth subaccount, they offer a great opportunities to put money away that will be tax free when withdrawn, as long as you wait until you are 59 1/2 and have had an account for at least 5 years. That said, if you're not happy with the fees and/or investment selections, and there is no match, then it's not an unreasonable decision to not invest in a 401(k). That said - if you don't plan on being with the company for the long term, investing in the 401(k) and rolling it over once you leave the company is also a reasonable strategy, if you want the tax break.

That said, I would strongly suggest that before you invest in taxable accounts, you and your wife each max out a Roth IRA, if you are eligible If you aren't eligible because your income is too high, then you may be able to do backdoor Roth contributions, assuming you don't have any Traditional IRAs in your name. (Please note - making contributions to a Traditional 401(k) can help you lower your income in order to be eligible for a Roth IRA.) In an IRA, you have nearly as much investment flexibility as you do in taxable brokerage accounts. And if you need to make withdrawals, you can always withdraw up to the amount that you contributed to a Roth IRA (but not the earnings) tax and penalty free, so Roth IRAs are more flexible than Traditional IRAs.

I would also question why you are so worried about penalties if your goal for these accounts is truly 'LONG TERM'. There are several different strategies that will allow you to make penalty free withdrawals, especially if you won't be withdrawing for a long time.

AJ
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Long term buy and hold can be an excellent strategy in a taxable account. You pay taxes only when you sell (or on dividends) and then at capital gains rates.

Of course, if you decide to sell the tax bill can be painful. Tax preferenced accounts do let you switch investments from time to time without paying taxes. In a volatile stock market that can be an advantage.

If you are a disciplined saver, either way (or both) can work. 401k payroll deductions tend to be painless and automatic. They fit right into your regular budget. 401k allows accumulation of larger sums than Roth IRA or IRA. So 401K and then rollover at some time in the future can be best.
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No. of Recommendations: 3
I am aware of the tax shelter they provide . HOWEVER, I have chosen to opt out and invest into the portfolios that I have created which give me more room to invest as I please in the companies I want with no withdrawal penalties.My goal for these accounts is LONG TERM

Put some long-term money in 401K.
Use the cheapest broad-based inded funds or ETFs that your/wife's 401K's offer.
Believe me, nobody here including you knows how to pick individual stocks for the long term.
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No. of Recommendations: 1
Both mine and my wife’s companys offer 401ks but they do not match.
I am aware of the tax shelter they provide . HOWEVER, I have chosen to opt out and invest into the portfolios that I have created which give me more room to invest as I please in the companies I want with no withdrawal penalties.My goal for these accounts is LONG TERM

Any thoughts????? are GREATLY APPRECIATED


If there's no matching, there's little advantage to a 401k over a regular IRA if you're able to put the same amount into either one. That may not be true because:
-The maximum amount you can put into an IRA is $6,000 ($7,000 if you’re >age 50) vs. $19,500 ($26,000 if you're >50) for the 401k,
-You intend to accumulate enough to send to the IRA every few months, and just can't get that much together, vs. the 401k money coming out of your check so you never miss it and don't have to "come up with it."

Also, if you invest in stocks and are fairly successful, you can minimize taxes each year by not selling or balancing gains against losses (although you can't do much about dividends). And, compared to a 401k or IRA, when you do cash out and spend the money, it will be taxed at the more attractive long term capital gains rates than the ordinary income tax rates of the 401k/IRA. Of course, the laws could change between now and your retirement and the lower cap gains rates could go away. PLUS, there's a rate better than the cap gains rate, and that's zero. Compare your after-tax strategy to the other two:
1. NO TAX ADVANTAGED ACCOUNT: No tax break now. Invest after-tax money in stocks, pay capital gains rates on the growth.
2. REGULAR IRA/401k: Tax break now (which should leave you with more money to invest). Invest pre-tax money in stocks, pay regular income taxes rates on the growth.
3. ROTH IRA/401k: No tax break now. Invest after-tax money in stocks, pay no taxes on the growth.

Clearly, #3 is better than #1, at least up to the Roth IRA limit. And even though the Roth rules could change, that's much less likely than losing the cap gains rate, or simply ALL rates going up across every bracket.

You can have your Roth IRA at Fidelity or Vanguard, and invest in nearly everything you'd otherwise be investing in outside of tax-advantaged accounts. (You usually can't invest in individual pieces of real estate or your small business or stuff like that in an IRA.)
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My guess is that whoever wrote the original post was requesting
actual investment suggestions for long-term investments.

Here are mine:

1. Microsoft: 30% of the whole

2. Apple: 30% of the whole

3. Amazon: 20% of the whole

4. NextEra Energy (NEE): 10% of the whole

5. Home Depot: 10% of the whole


And there you have it, my suggestions for your long-term
investments. I am assuming that your all-caps "LONG TERM"
means at least 10 years.

My final suggestion is this: if you disregard or do not act
on the foregoing, create a fictional portfolio containing the
above holdings in the above-stated quantities, and see how it
is doing in 2030.

Tomjet
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My guess is that whoever wrote the original post was requesting
actual investment suggestions for long-term investments.


Really? Let's look at the evidence:

- Title of "401k yay or nay???"
- First statement in the post was "I have recently created a stock portfolio via thru my Fidelity brokerage thanks to the MF guidance"
-The OP's first posts were to the Premium Commons boards - meaning that the OP has purchased MF advisory services https://boards.fool.com/profile/rxma2004/activity.aspx

That combination of items certainly did not lead me to believe that the OP was looking for advice on particular stocks to buy - rather the OP was really looking at what type of investment account - 401(k) or taxable - they should be putting their investment dollars into.

Here are mine:

1. Microsoft: 30% of the whole

2. Apple: 30% of the whole

3. Amazon: 20% of the whole

4. NextEra Energy (NEE): 10% of the whole

5. Home Depot: 10% of the whole


And there you have it, my suggestions for your long-term
investments. I am assuming that your all-caps "LONG TERM"
means at least 10 years.


Wow, you are taking a lot of concentrated risk, if by 'whole' you mean your entire portfolio.

AJ
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No. of Recommendations: 1
I'm retired from the Financial Planning industry, but I continue to get e-mail updates and articles on various topics in retirement planning, two of the biggest are PlanSponsor and BenefitsLink. There have been a series of articles and announcements I've noticed over the past couple of years on the number of litigation actions in the form of employee class action lawsuits brought by specialty law firms against large employer 401(k) plans, primarily for excess fees but also for restrictions on investment options. This was always my gripe that 401(k) fees, including fund fees, were excessive compared to what you could get through a discount broker. Now, certainly, 401(k)s with their multiple non-discrimination testing and other ERISA mandated limits and restrictions, will cost more to administer than an IRA at Schwab. But with the lower costs of an IRA and the much greater flexibility in managing it, would make it my first choice over a non-participating 401(k) or 403(b) or 457(b) through an employer.

The one benefit of the 401(k) to consider is its unlimited protection from creditors (except former spouses) and bankruptcy, something you may not be able to get from your state regulated IRA creditor protections, although IRAs are now protected under Federal Bankruptcy filings.

Once you've maxed out you/your spouse IRA at $6,000 each ($7,000 if 50 or older) and you still wish to contribute toward retirement, I'd use a taxable brokerage account and focus on growth oriented ETFs while investing in bonds or dividend payers in your IRA and/or 401(k). Growth ETFs tend to be capital gain tax efficient. If you expect this taxable brokerage account to be a sizable part of your retirement savings, I'd strongly encourage you to make sure you have high liability coverage on your auto and home and then at least a $1MM umbrella insurance plan on top of that. One auto accident for which you are determined negligent (at fault) that puts breadwinners out of work and children with life injuries, will quickly deplete your normal auto liability and then the insurers that paid for the injuries will go after your assets....and they're darn good at it. In such a case, your retirement plans will be protected, but your taxable brokerage account will not.

BruceM
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There is one more thing about the PLAN that your 401k is administrated by: its options. If you have bland, S&P500 target date funds as your only option, you would do well to keep the portion of your investments low such that you can control growth by allocating to specific companies that you desire to place your precious savings into.

I have yet to see a 401k with options that are attractive to me or those who have reviewed their plans with me.

If you are working in an position that has you bouncing from firm to firm, this is less of a concern. You can rollover these funds to an IRA after the switch.

I have done this three times in the last 10 years. Without rollover options, I would more than 7 years further behind schedule to retirement.

This is specifically because I could invest in the below companies instead of ultra conservative target date funds from vanguard.

NFLX
AMZN
GOOG
MELI
SHOP
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I have yet to see a 401k with options that are attractive to me or those who have reviewed their plans with me.

There are good plans out there, even some that include brokerage options. At Fidelity, they call it Brokerage Link https://www.brokerage-review.com/ira-account/401k/fidelity-b... I'm pretty sure that ETrade and Schwab, among others, also offer this as an option. Of course, the company sponsoring the plan has to choose this option to offer to their employees.

AJ
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