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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.

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