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skitime said:

I don't like to tell people they are wrong, but you are...Before saying someones advice is bad just because they are a salesperson. YOU need to do the numbers...(sorry to be harsh)

No problem, it's over a message board, not anyone I know.

When you chose to invest in a non-retirement account you pay your income tax and capital gains tax. That is being taxed twice.

I don't like to tell people...yadda yadda yadda. That may be two different times your taxed, but each dollar is only getting taxed once. The money you put in is taxed as ordinary income, and the money you made (hopefully) down the line when you sell the investment.

When you invest in a retirement account (401K) you don't pay any tax until you retire. Then you pay your income tax. You are ONLY taxed once. And if your tax bracket drops in retirement (or we get a tax cut) you get a bonus.

And if you're in the 28% tax bracket and stay in that bracket when you retire, since if you're a successful investor, you'll be comfortable in retirement, that being taxed once is still 28%. I'd rather not use optimistic or speculative scenarios, instead plan conservatively, and not be caught short-handed.

Using the #'s you supplied in one of your posts and using them with the SEC'S Mutual Fund Cost Calculator here:

I got some different #'s.

Investing the same $2,000 with the same 10% return, but over the long-term (since this is in a retirement account), say 30 years and subtracting the 2.15% expense ratio the original poster stated, your account would be worth $18,181.74. And would have paid $5,012.43 in fees. Now tax this at 28% ($5,090.89) and you'de be left with $13,090.85.

Investing $1440 at 10% return over 30 years in SPY as the original poster wanted to do and subtracting .12% expense ratio and broker cost of $10 (discount broker) your account is worth $33,640.50 ,paying $833.64 in fees, taxed at the max long-term capital gains tax rate of 18% ($6055.29), youre left with $27,585.21. And since SPY's yield is a paultry 1%, it's not much more than the .12% expense ratio, which is tiny compared to the ordinary income tax rate.

Holding long-term in a taxable account can sometimes be a better alternative. Especially when compared to a costly 401k plan. But you'll never learn that from an advisor, though. But you will at the Fool.

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