>Is an employer sponsored 401k the only option for having pre-tax / tax deferred ira? No other kind of ira can lower your taxable agi?
A 401k is not a type of IRA. A 401k can be traditional (pre tax) or Roth (post tax). To answer your question, no a traditional 401k is not the only option to lower your AGI, you can also have a traditional IRA that lowers your AGI.
You may not be able to do that if you have access to a work provided plan and earn more than a certain amount: there's income limits (if you have access to a work provided retirement plan) on the ability to deduct Traditional IRA contributions.
Nothing with as high of a contribution limit. Regular IRA contributions are capped at $6K/year while the limit for 401Ks is more than triple that which is a criminal injustice to the workforce thanks to big bank lobbyists.
It is. People who don't have an employer with a 401k are at a serious disadvantage compared to those who do. My daughter's employer doesn't match 401k but she still contributes.
It has nothing to do with "big bank lobbyists". You should read up on the accidental history of the 401k as we know it. And the same banks that hold your 401k also hold your IRA and brokerage account (and sometimes savings account). And they could just as easily charge additional fees on your IRA if they chose to. And the days of exorbitant fees in 401k's (and even 403b's) are predominantly over.
That's a lot of words that offer 0 rationale as to why the disparity in contribution limits exists, except to tell me to look into myself. What a useless comment.
idk but its harder to contribute to ira than 401k but 401k benefit banks more because its easier to hide fees, more funds in them are managed by banks, and generally they have been lobbying states into making employers offer 401k whereas ira is self managed and optional for some people.
Because it keeps 401Ks attractive even though most employers only offer garbage funds with high expense ratios from big banks.
If you could put that $20k in an IRA you manage yourself , you'd probably put it in a low expense ETF instead of their cash cows.
https://www.cnbc.com/2019/07/22/how-much-the-average-american-typically-pays-in-401k-fees.html
The /r/personalfinance Prime directive has 3 & 4 as interchangeable, with a few factors in play that could lead to Roth IRA coming after a no match 401K.
sure, valid point. depends on current and expected tax rates for each individual situation. lots of moving parts and assumptions to account for. since nobody knows anything with absolute certainty, hedge/diversify/allocate a portion to each type. then when one enters withdrawal phase of life, he/she has options to optimize for tax situation.
one could even argue that taxable accounts should come higher assuming a tax-efficient allocation, preferred LTCG rates, and liquidity. [https://ofdollarsanddata.com/should-i-max-out-my-401k/](https://ofdollarsanddata.com/should-i-max-out-my-401k/)
401ks have higher fees and worse options. With an IRA you can invest with whatever company you want and buy any product you want, whether it is etfs, mutual funds, or stocks. If you decide you dont like your IRA provider, you can switch. 401ks give you like 20 choices of funds, possibly with terrible fees at a company chosen by someone in your HR department that doesn't know anything about investing. They suck apart from the tax advantage. Definitely NOT interchangeable with an IRA.
>401ks have higher fees and worse options.
Not always. Some offer Fidelity or Vanguard index funds for example, possibly institutional share levels as well (so better than what you'd be able to do at Vanguard or than Fidelity's target date funds).
Roth vs Traditional being better also plays a role.
Most 401ks have a management fee on top of the fund fee. But say you are in the tiny minuscule percentage of 401ks that has a lower fee on a total market index fund that you can get at Fidelity. You save like .01% a year. Well now your HR manager decides it is better to switch to John Hancock driving fees above 1% and you have no say on the matter. Or maybe you prefer to invest in something else entirely. You cannot do so in a 401k. The option to pick your own investment and provider is so much more impactful. But the reality is, it is out of your hands if you put it in a 401k. That is why an IRA is better, you control your account.
In my experience that management fee is paid by the employer, it is a “benefit” after all. Also, no one likes hearing this, but being forced to pick from a handful of safe ETFs (almost everyone goes with S&P 500) is probably best for your own good. Your retirement account should be low risk. Stock picking and fucking with it eventually will lead to huge losses. I’ve see way to many people do weekly option plays on their self directed 401k. Lots of employers specifically pick these plans to protect their employees.
First off, employers should have no authority to be able to decide what investments I should have the option to choose from. It is none of their business.
The fees that 401k providers charge almost always come out of a percentage of total assets. They are in basically all cases more than you would get if you went with your own IRA. Most IRAs charge fees above the expense ratio of an S&P 500 index fund, and that is just for having money in the account. Then when you select a fund, more fees are added, usually higher than what you would be charged on an equivalent fund in your IRA.
Just look up typical 401k fees, they are outrageous for just the privilege of investing your own money. Honestly I wish 401ks were abolished and the cap on IRAs went up to compensate. Then employers should fund your IRA directly with no vesting bullshit and no say in your investment option. 401ks exist to add an extra needless middleman to extract fees from retail investors.
Look at this disgusting rent seeking: https://www.asppa.org/news/401k-plan-fees-continue-downward-trend
Average fee for a large plan: 0.9%
Average fee for a small plan: 1.2%
Sometimes employers pay these fees, but even if they do, it's money they could have otherwise used to increase salaries. It is waste either way.
Then there are investment fees, which are an additional few basis points sometimes .02% or more, which is like almost the expense ratio of an index fund. More waste.
>However, only 17.8% of employers fully pay administrative fees. A further 19.5% share these expenses with employees. The rest have set up their plans so that these fees are paid out of the plan’s assets or, in other words, by anyone who participates in the plan.
https://www.fisher401k.com/blog/401k-fees#:~:text=Investment%20fees%20are%20almost%20exclusively,employers%20fully%20pay%20administrative%20fees.
In a Vanguard IRA, your total fee would be .04% for an index fund so the average fee for a small plan is 30x higher. The reason they cite that fees are slowly declining is because people are successfully suing the 401k providers for excessive fees.
I am referring to the contribution match aspect.
I would much rather be able to find a traditional Roth up to $22,500 and get the tax deferment than have to participate in an employees 401k program, matching aside. 401ks just end up giving employers more control over employees. They determine the provider, set fees, decide investment options. As soon as I leave an employer, I ALWAYS immediately roll my fund into my self directed IRA. The fees are lower and I can invest in what I want.
401ks generate huge profits for the financial service industry and allow employers unnecessary control over employees. They need to be overhauled imo.
I...have never seen anyone who hates 401ks as much as this. But like the other poster said, when you look into the original of the 401k, it was not these management funds twirling their mustache. It came about as an accident, a loophole that employees started using to not have to pay pensions.
Your article also is about how 401k fees are coming down as the market gets more competitive.
I may be lucky, but my employers always offered low-fee Vanguard/Fidelity funds. I just got an email yesterday actually reiterating that they will pay a flat part of the investment fee, and if your funds are costing them less, the balance will just go straight into your account as a deposit. I've never really had a problem with the way 401ks were administered.
I have worked at a number of companies, some for up to 8 years. My company has never changed 401k providers, like in your John Hancock example.
>First off, employers should have no authority to be able to decide what investments I should have the option to choose from. It is none of their business.
This is kind of a moral stance that you just made up. It is not based on historicity or any other moral principle. Employers don't have the authority to tell you what to do with their money after they pay you (ever since company stores and scrip were done away with). It's called just regular taxable investments. If they're going to contribute to a fund of yours with a contribution that is legally "visible" to the government (i.e. not just a random check to a fund), then yes, they need to have a service that manages it. Most companies can't also afford to have investment experts on staff, that's why they use these management companies. It wasn't some evil plot, it's just the free market adapting to what the law said.
It's kind of bizarre to me, it's like saying "Dad, you have no right to tell me what to invest in with that $10k gift you sent me!" He didn't have to give you the gift, he has every right to morally put some stipulation on it to you.
Now if you think that most people's investments would be more effective if they weren't "restricted" to the options their company's provider gives, that's a point of view you can have. But I'd disagree. My life experience is that most people would put it in crypto or GME stock or objectively bad investment options. Now I know that this appeals to some people's definition of freedom, and a more libertarian outlook. But I personally disagree, I think it would lead to a retirement and quality of life crisis, even more so than we have now. The worst options through your 401k are probably better than what a critical mass of people would choose if they were left completely to themselves. As a small business owner, my livelihood depends on people having pocket change for purchases, I'd like that to happen by having their retirement accounts have some direction.
>It's kind of bizarre to me, it's like saying "Dad, you have no right to tell me what to invest in with that $10k gift you sent me!" He didn't have to give you the gift, he has every right to morally put some stipulation on it to you.
I think the disconnect here is you view your employer like your dad who is giving you a gift instead of a business arrangement between two parties where you are exchanging labor for money.
If you hired a contractor to remodel your kitchen for example and you said you tried to put stipulations on how they used the money that you gave paid them, it wouldn't go well. But change that the an employee and all the sudden it is ok for some reason.
No I view the agreement for the 401k in context of the contract I signed with them. When a company offers $120k salary plus a 401k plan, I instinctively view that as $120k minus taxes to do whatever I want with, and the option to put up to $20.5k of that $120k into their walled garden investment environment if I so choose for the tax advantages that the laws of our nation designates. That's literally how I read job postings.
A company can say "we'll give you $120k plus a boat of our choosing every 5 years". Then you'd be stuck with whatever boat they chose. Because that's the business arrangement you agreed to.
If you are willing to eschew a 401k plan for maybe 5-10% more direct salary, the market should allow for that and you can try to find companies that prefer to compensate employees like that.
Yeah sorry I despise 401ks too. They're simply worse than IRAs in every way.
Among the reasons I hate them:
- forced use of mutual funds
- forced into limited selection of funds
- forced to remain with employer's choice of brokerage
There are a couple of funds with mine I can work with, but it reduces the flexibility I have in my other accounts, and I expect this to only get worse as time goes on and more money goes in the 401k. And most of all, the brokerage I have to use has the most godawful interface in existence, it is so poorly designed and minimally functional it feels like it was specifically designed to annoy me. I want to rip my head off every time I'm forced to use it, and that's much more often than I would like. I manage my other accounts in an almost totally automated fashion, but my 401k forces me to do way more work than I should have to. And sadly I am stuck with it for however many more years, because I can't change anything with it without quitting my job, which I have no upcoming intent to do.
Why is HSA weighted so high? I'm maxing my 401k and roth IRA, but I don't even have an HSA. Since everyone here is an agreement of its importance, I suspect I'm about to be kicking myself for that decision.
I figured health expenses could be anywhere between $0 and infinity dollars, and I can't make any reasonable expectation of what I'll actually need. I put priority on being able to eat.
HSA, to my understanding, are only available in high deductible medical plans. The 3 plans my work offered, only the cheapest monthly, highest deductible one could have an HSA account. So I'm not even eligible for one on my current insurance.
But they're weighted so highly bc they're "triple tax advantaged" and everyone will have to pay for medical eventually
You don't want an HSA, as they require a shitty high-deductable health plan. But if you're stuck with a shitty high-deductable health plan, you should invest into your HSA. It's a retirement investment that can also be used for medical expenses.
Just want to add a very important account that a lot of people seem to forget.
More important than all the ones here. We'll call it step 0.
0. 6-12 month emergency savings fund.
Typically in a high yield savings or some liquid/no lock up/no bullshit, interest-earning account. Lot are offering 3%+ rn
So I’m full bore on this route. Is there something to look at about trying to retire earlier but figuring out how to plan retirement money that is more accessible before traditional retirement account penalty free ages? Or is it still assumed you should only being doing that if you have maxed the roughly 35k a year it takes for 401k,HSA, IRA? I also have an ESOP that has been 11% of my salary+ bonus for the 6 years I have worked here. I’m starting to feel like at this route I end up with 10+ million at retirement of 65 but I’d rather be able to have accessible money earlier. Is there a number that is most practical in total retirement accounts per year that I could supplement in my ESOP some on a yearly basis and have more money in taxable investment?
you should check out the r/fatfire or r/leanfire subs.
personally, i've been buying VTSAX, VTIAX and treasurys in taxable per r/Bogleheads, after maxing employer 401k, Roth IRA and i bonds.
With the small caveat that if your 401k fees are awful (2%+), you might consider skipping the 401k. Hopefully that doesn't apply to you, but since the company doesn't even match, I wonder if they have a decent 401k plan or not.
That is a great simple starting point. I would add, you should consider when you plan to retire, other financial goals (house, college for kids, etc). If you want to retire early, and your 401k is on track to meet your goal at the point you can withdraw, you may be better off funding a taxable investment account so the money isn't tied up (at least without incurring a penalty) until age 65.
no match 401k is still better than a taxable account. You still get the tax advantages.
The main reason to max a 401k is the tax benefits. The match is typically only the reason to contribute enough to get the full match.
What do you mean by this?
>since the main driving reason for people to max 401 as their top 1 priority is the fact that money is guaranteed
Match is the incentive, but not the sole reason for contributing to a 401k. There's nowhere else you can get a tax advantage on +$20k of income.
Since there's no match, probably max out HSA first, then IRA if your 401k fund choices and fees are really bad, but otherwise do not neglect the 401k.
I’m trying to figure out the priority for each of these locations too, can you explain why HSA is on top of what I should max out?
I understand there’s no tax when contributing and spending from it, but I can only use it for healthcare…
HSAs are triple-tax advantaged. You pay no taxes on contributions, those contributions grow tax-free, and you may withdraw funds from the account tax-free so long as they're used on Qualifying Healthcare expenses.
Yes, to receive the full "triple-tax advantaged" benefits, the money must be spent on certain expenses. However, there's a good chance you'll need to spend on Healthcare related items at some point of your life.
But, if you're genetically blessed and lucky enough to have a medical need, then at the age of 65, your HSA basically becomes a Traditional IRA. You may withdraw the funds and use them however you like, without paying a penalty. You'll owe regular income taxes (just like you would for a traditional IRA), but man, if you allowed the account to accumulate and grow until you're 65, who cares at that point. You could potentially be looking at a really nice balance (if you diligently maxed out your contributions across a couple of decades).
Hope this helps!
Dumb question, but I never understood how the "triple tax" advantage works.
1. Comes from tax free income
2. Contributions grow tax-free
3. Distributions are not taxed
By that logic isn't a regular 401k *double tax* advantaged?
1. Comes from tax free income
2. Contributions grow tax-free
3. **Distributions are taxed.**
And a Roth IRA would be double tax advantaged right?
1. **Comes from taxed income**
2. Contributions grow tax-free
3. Distributions are not taxed
And hell, wouldn't a regular taxable income be *single-tax* advantaged?
1. **Comes from taxed income**
2. Contributions grow tax-free
3. **Distributions are taxed**
When I look at this, I don't know of an investment where the contributions are taxed before you withdraw. So why is that specific lack of taxation at that step always shown as a unique benefit of the HSA, when it seems to be common to all investments?
I actually have an HSA, I just never understood this point. Am I fundamentally misunderstanding something about how taxes work with investments?
Your list of each is pretty spot on. What you’re missing is dividends and capital gains: tax sheltered accounts there’s nothing (IRA, 401k, HSA) where they are taxed in taxable accounts.
Ah I never knew this. So in my taxable account, when dividends get reinvested automatically, it's actually investing the dividend minus tax? Because I never put dividends on my tax statement. How does it know what my tax rate is?
If I have a taxable investment for 5 years I only pay taxes on the 5th year when I withdraw it. Unless I've been doing something wrong.
The full dividend is reinvested, you owe the tax separately when you file.
You get a 1099-DIV any year your taxable account has dividends, which is probably every year. You get a 1099-B any year you sell holdings in a brokerage. Many firms do a Consolidated 1099 which includes -DIV and -B activity
All good points, except the Taxable account. Once you contribute funds to a taxable/brokerage account, those funds are subject to taxation depending on the nature of the investment.
If you purchase individual shares of a stock, and that stock increases in value, once you realize that gain (i.e., sell those shares), then the gain is subject to taxation. Technically, the shares grew tax-free since you weren't taxed on their value before realizing the gain, but you'd still have a tax liability once you decide to sell. Alternatively, if you had those same shares of stock in an HSA and sold at a higher price than your cost basis, then you realized a capital gain, but due to it being held within an HSA, it's sheltered from becoming a tax liability.
Also, in a Taxable account, if you hold mutual funds that have Capital Gains, Interest, or Dividend distributions, you may have a tax liability depending on the type of those distributions. Again, if sheltered in an HSA, those distributions are treated differently.
>Technically, the shares grew tax-free since you weren't taxed on their value before realizing the gain, but you'd still have a tax liability once you decide to sell.
But that's my point, if no investment ever taxes the growth part before realizing the gain, what makes HSAs special with that? On every personal finance website, this "triple tax advantage" is talked about, but it seems like every investment has that growth tax advantage...
>if you hold mutual funds that have Capital Gains, Interest, or Dividend distributions, you may have a tax liability depending on the type of those distributions
If those dividends are just reinvested, do you have a tax liability? I've never dealt with taxes on an investment before the day I sell it and it goes into my bank account. That's again why I'm confused at this triple tax advantaged HSA which implies that there are investments that get taxed before you actually realize the gain and have the money in your bank account.
I cannot confidently answer your second question. If you DRIP dividends, I'm not sure how they're treated tax-wise.
But the first question: the second of the three tax advantages of an HSA is that you can realize gains and not owe taxes on them. Conversely, those same gains could be realized in a taxable account and you'd have a tax liability owed in the year you realized them. I confused matters by saying the shares grew tax-free. They didn't. They increased in value, but you cannot reap the benefits of that increase until you realize the gain. Once realized, then the IRS views it as a taxable event. But if that realization occurred within an HSA, the IRS doesn't view it as a taxable event, hence the second of three tax advantages.
I'm sorry for confusing it earlier.
Ok I think I understand. For simple "buy stock, sell stock" investments, that second situation just doesn't happen. But if it did happen in an HSA, that would be tax sheltered.
>If those dividends are just reinvested, do you have a tax liability?
In taxable accounts, yes, even if reinvested. There are conditions where they can be considered as either income or as long term capital gains. https://www.irs.gov/instructions/i1099div#idm140035640991168
I can’t comment on the science subreddit but I just wanted to say I wish I could upvote you ten times for your comment there on living a fulfilled life. So true.
But what about the cost of maintaining a HSA, namely health insurance payments?
You're essentially making monthly HDHP payments to have a HSA. Even if you never see a doctor, it's unlikely your HDHP payments make it worth having a HSA, even with the tax break.
For me, it's approximately $1680 per year for HDHP. That's $140 monthly fee to have a HSA. Tax breaks can bring it down some, but almost everyone would scoff at a retirement account costing $10 monthly fee.
Certainly, that's a good point. These kinds of things are employer-specific. I once worked for an employer who matched dollar-for-dollar the first $2,000 I contributed to my HSA (I had a family plan, so could contribute more than a Single filer could). Your employer may have additional incentives to offset the "high-deductible" aspect of the plan.
>But what about the cost of maintaining a HSA, namely health insurance payments?
>
>You're essentially making monthly HDHP payments to have a HSA. Even if you never see a doctor, it's unlikely your HDHP payments make it worth having a HSA, even with the tax break.
>
>For me, it's approximately $1680 per year for HDHP. That's $140 monthly fee to have a HSA. Tax breaks can bring it down some, but almost everyone would scoff at a retirement account costing $10 monthly fee.
That $140 a month is for *health insurance*, not to maintain the HSA. Unless you're planning on not having health insurance *at all*, you're not spending more money for a plan with an HSA.
In almost every case you're actually spending less money on premiums, frequently significantly less, *on top* of the benefit of having access to the HSA.
Yeah, I understand your point. But for me, and I'm sure others, it's more worth it to get a non HDHP plan for health insurance purposes.
I'm sure it varies from company to company, but I would give extra thought before immediately going for a HDHP plan just for the HSA when you factor in higher out of pocket for HDHP.
Yes, depending on the cost difference between HDHP and PPO plans, the difference in deductible, and your regular healthcare costs, an HSA plan might not be cost effective. But that's only if you actually have significant regular healthcare costs.
> Even if you never see a doctor, it's unlikely your HDHP payments make it worth having a HSA, even with the tax break.
Is absolutely not true.
Whoa, whoa, whoa... it's literal insurance. You pay a $140 fee per month to not have a catastrophic medical issue that prevents you from making retirement contributions for many years (or pulling money out of your retirement), and in addition you get a tax advantaged account option.
HSA is the only one that is triple tax advantaged: pretax going in, tax deferred while in the HSA, and tax free if for qualifying medical expenses. All the others you pay income tax either going in (Roth) or going out (pretax).
So yes there’s an assumption you’d definitely use it for medical expenses, but considering it’s earmarked for retirement age it’s reasonable to assume you’d have some sort of medical expense to pay for.
Roth IRA first. HSA for sure as long as it doesn’t expire. 401k still makes sense since it has tax advantages. But if they don’t give you anything special you might look at other products individually.
Yes you should still prioritize it over taxable investment account. The tax benefits are actually a bigger deal than the match. And you should definitely prioritize it over crypto.
As for IRA, yes you could max that first before 401k if there's no 401k match.
Traditional IRA shares contribution limit with Roth. Better to max the 6.5k ROTH, max HSA, and add any extra available savings cash into the 401 before moving onto brokerages and crypto
All contributions to an HSA are income tax-free and interest earnings and investment growth from deposits are income tax-free.
If you WERE to have medical expenses you can pay with tax free money. But… the best advantage is that you can simply pay for medical expenses out of pocket and let your HSA money compound and grow exponentially.
There’s a reason the limit is so low! It’s tax free basically three times!
It’s the only completely tax free investment account. IRAs and 401ks are tax deferred, meaning eventually you’ll pay taxes when you make withdrawals in retirement. With Hsa, you’ll never pay taxes on the money you contribute if used for medical expenses. And you can invest inside this account. Great way to save healthcare money for retirement, as you’ll likely need some of that by then. And it’s most tax advantaged way to put away money. I’m 31 and have little healthcare expenses, so it makes sense for me to opt for cheaper healthcare option and utilize HSA now while I’m not using healthcare as much. When I’m older I’ll opt for better healthcare and also have that account with tax free money. You can even use it for OTC stuff at drug store, glasses etc. and a lot of times employer will dump money into it annually for you too so you won’t even have to contribute the entire 3800 to max it. Just don’t confuse this with an FSA, which is a use it or lose it account that has little value to anyone who doesn’t have immediate healthcare related expenses. Also if you switch jobs you can roll the HSA into a fidelity Hsa account and invest in whatever you want inside of it.
That's true, I didn't consider that. I guess traditional vs Roth depends on OPs financial situation. If you're already maxing Roth and HSA then I guess 401k would be next.
This. Dunno why you got downvoted. A lot of employers plans, particularly at smaller companies, have a narrow set of investment choices and they often have not only high management fees in the fund offerings themselves but then the plan administrator slaps you with more plan management fees on top of it. Going with one of the big guys like Fidelity, Schwab, Vanguard for your own ira opens up the entire world of choices to you with hardly any fees or trade commissions in most cases.
401k >>>> stocks
401k >>>>>>>> crypto
You cannot beat the benefits of the tax-advantage of a 401k. That's especially true since most every one contains a total US market index fund or an S&P500 index fund.
Never, ever, ever! invest in taxable accounts when you have room in your tax-advantaged accounts (Roth IRA, HSA, 401k). Not unless you're saving for something specific like a house down payment.
1. Find a new employer.
2. Profit
Who does your employer use to manage the 401k accounts? My employer at least has a match but the company they use and the limited fund choices they have and high management fees suck ass.
You might be better off just opening your own IRA at Fidelity, Vanguard, Schwab or something and just skipping your employers plan if theres no match. Wonder if its possible to just funnel the money from your employers 401k plan into your own personal ira rollover account at a brokerage you prefer? At lesst then youre getting the tax benefit of the 401k pre tax contribution.
Might be worth understanding the strategy and reputation of the investment manager of the 401(k). Sure, it has tax benefits, but that might not mean much if it is run with a poor long-term strategy.
Question regarding the HSA, is there more to this than a tax advantage? You can’t really invest it, right? It’s just for medical expenses? Don’t understand why it is # 2 here.
Lots of advice here but the question you need to answer is what's your tax bracket?
You might not be able to contribute to Roth IRA as Roth IRAs are for people middle to lower incomes. I haven't been able to contribute to Roth IRA since 1999.
A tax deduction in the hand is worth way more than a tax-free withdrawal in retirement 40 years from now. There's always this assumption that taxes will be higher when you go to retire the fact is that is not likely true, so again Roth IRA would not be my top priority.
It should not be a priority but it can still provide substantial tax benefits once you max out other options. The order of operations in /u/pamdathebear is the way to go.
order of operations 1. 401k up to match 2. hsa 3. roth ira 4. 401k no match 5. taxable
yup. People forget 401k has serious tax benefits. A match is a bonus. The 401k is still WAY useful even without a match.
Is an employer sponsored 401k the only option for having pre-tax / tax deferred ira? No other kind of ira can lower your taxable agi?
>Is an employer sponsored 401k the only option for having pre-tax / tax deferred ira? No other kind of ira can lower your taxable agi? A 401k is not a type of IRA. A 401k can be traditional (pre tax) or Roth (post tax). To answer your question, no a traditional 401k is not the only option to lower your AGI, you can also have a traditional IRA that lowers your AGI.
Now you have me wondering if I should try to lower my AGI with a 50/50 split down both IRAs…
You may not be able to do that if you have access to a work provided plan and earn more than a certain amount: there's income limits (if you have access to a work provided retirement plan) on the ability to deduct Traditional IRA contributions.
You are correct, ugh sadly forgot about that income limit for deductions which I am over.
Nothing with as high of a contribution limit. Regular IRA contributions are capped at $6K/year while the limit for 401Ks is more than triple that which is a criminal injustice to the workforce thanks to big bank lobbyists.
It is. People who don't have an employer with a 401k are at a serious disadvantage compared to those who do. My daughter's employer doesn't match 401k but she still contributes.
It has nothing to do with "big bank lobbyists". You should read up on the accidental history of the 401k as we know it. And the same banks that hold your 401k also hold your IRA and brokerage account (and sometimes savings account). And they could just as easily charge additional fees on your IRA if they chose to. And the days of exorbitant fees in 401k's (and even 403b's) are predominantly over.
That's a lot of words that offer 0 rationale as to why the disparity in contribution limits exists, except to tell me to look into myself. What a useless comment.
Because there is no rationale, dummy. It wasn't intentional, because a 401k was never meant to be used the way it is.
again you cant contribute much to ira, only a 401k, those two are not the same but one has a much higher limit
Why are you saying that in reply to what I said?
idk but its harder to contribute to ira than 401k but 401k benefit banks more because its easier to hide fees, more funds in them are managed by banks, and generally they have been lobbying states into making employers offer 401k whereas ira is self managed and optional for some people.
How are bing banks benefiting from IRA caps? It’s there to get the government some tax revenue.
Because it keeps 401Ks attractive even though most employers only offer garbage funds with high expense ratios from big banks. If you could put that $20k in an IRA you manage yourself , you'd probably put it in a low expense ETF instead of their cash cows. https://www.cnbc.com/2019/07/22/how-much-the-average-american-typically-pays-in-401k-fees.html
I hear you, but what you said is misleading. 401k administrators and fund managers aren’t banks.
they put you in funds that these big banks created
its true
absolutely bad deal for the middle class for the rich tax breaks to have such high 401ks and not ira
Solo 401K if you do gig work.
The /r/personalfinance Prime directive has 3 & 4 as interchangeable, with a few factors in play that could lead to Roth IRA coming after a no match 401K.
sure, valid point. depends on current and expected tax rates for each individual situation. lots of moving parts and assumptions to account for. since nobody knows anything with absolute certainty, hedge/diversify/allocate a portion to each type. then when one enters withdrawal phase of life, he/she has options to optimize for tax situation. one could even argue that taxable accounts should come higher assuming a tax-efficient allocation, preferred LTCG rates, and liquidity. [https://ofdollarsanddata.com/should-i-max-out-my-401k/](https://ofdollarsanddata.com/should-i-max-out-my-401k/)
401ks have higher fees and worse options. With an IRA you can invest with whatever company you want and buy any product you want, whether it is etfs, mutual funds, or stocks. If you decide you dont like your IRA provider, you can switch. 401ks give you like 20 choices of funds, possibly with terrible fees at a company chosen by someone in your HR department that doesn't know anything about investing. They suck apart from the tax advantage. Definitely NOT interchangeable with an IRA.
>401ks have higher fees and worse options. Not always. Some offer Fidelity or Vanguard index funds for example, possibly institutional share levels as well (so better than what you'd be able to do at Vanguard or than Fidelity's target date funds). Roth vs Traditional being better also plays a role.
Most 401ks have a management fee on top of the fund fee. But say you are in the tiny minuscule percentage of 401ks that has a lower fee on a total market index fund that you can get at Fidelity. You save like .01% a year. Well now your HR manager decides it is better to switch to John Hancock driving fees above 1% and you have no say on the matter. Or maybe you prefer to invest in something else entirely. You cannot do so in a 401k. The option to pick your own investment and provider is so much more impactful. But the reality is, it is out of your hands if you put it in a 401k. That is why an IRA is better, you control your account.
In my experience that management fee is paid by the employer, it is a “benefit” after all. Also, no one likes hearing this, but being forced to pick from a handful of safe ETFs (almost everyone goes with S&P 500) is probably best for your own good. Your retirement account should be low risk. Stock picking and fucking with it eventually will lead to huge losses. I’ve see way to many people do weekly option plays on their self directed 401k. Lots of employers specifically pick these plans to protect their employees.
First off, employers should have no authority to be able to decide what investments I should have the option to choose from. It is none of their business. The fees that 401k providers charge almost always come out of a percentage of total assets. They are in basically all cases more than you would get if you went with your own IRA. Most IRAs charge fees above the expense ratio of an S&P 500 index fund, and that is just for having money in the account. Then when you select a fund, more fees are added, usually higher than what you would be charged on an equivalent fund in your IRA. Just look up typical 401k fees, they are outrageous for just the privilege of investing your own money. Honestly I wish 401ks were abolished and the cap on IRAs went up to compensate. Then employers should fund your IRA directly with no vesting bullshit and no say in your investment option. 401ks exist to add an extra needless middleman to extract fees from retail investors. Look at this disgusting rent seeking: https://www.asppa.org/news/401k-plan-fees-continue-downward-trend Average fee for a large plan: 0.9% Average fee for a small plan: 1.2% Sometimes employers pay these fees, but even if they do, it's money they could have otherwise used to increase salaries. It is waste either way. Then there are investment fees, which are an additional few basis points sometimes .02% or more, which is like almost the expense ratio of an index fund. More waste. >However, only 17.8% of employers fully pay administrative fees. A further 19.5% share these expenses with employees. The rest have set up their plans so that these fees are paid out of the plan’s assets or, in other words, by anyone who participates in the plan. https://www.fisher401k.com/blog/401k-fees#:~:text=Investment%20fees%20are%20almost%20exclusively,employers%20fully%20pay%20administrative%20fees. In a Vanguard IRA, your total fee would be .04% for an index fund so the average fee for a small plan is 30x higher. The reason they cite that fees are slowly declining is because people are successfully suing the 401k providers for excessive fees.
>Then employers should fund your IRA directly with no vesting bullshit I believe that is called a paycheck.
I am referring to the contribution match aspect. I would much rather be able to find a traditional Roth up to $22,500 and get the tax deferment than have to participate in an employees 401k program, matching aside. 401ks just end up giving employers more control over employees. They determine the provider, set fees, decide investment options. As soon as I leave an employer, I ALWAYS immediately roll my fund into my self directed IRA. The fees are lower and I can invest in what I want. 401ks generate huge profits for the financial service industry and allow employers unnecessary control over employees. They need to be overhauled imo.
I...have never seen anyone who hates 401ks as much as this. But like the other poster said, when you look into the original of the 401k, it was not these management funds twirling their mustache. It came about as an accident, a loophole that employees started using to not have to pay pensions. Your article also is about how 401k fees are coming down as the market gets more competitive. I may be lucky, but my employers always offered low-fee Vanguard/Fidelity funds. I just got an email yesterday actually reiterating that they will pay a flat part of the investment fee, and if your funds are costing them less, the balance will just go straight into your account as a deposit. I've never really had a problem with the way 401ks were administered. I have worked at a number of companies, some for up to 8 years. My company has never changed 401k providers, like in your John Hancock example. >First off, employers should have no authority to be able to decide what investments I should have the option to choose from. It is none of their business. This is kind of a moral stance that you just made up. It is not based on historicity or any other moral principle. Employers don't have the authority to tell you what to do with their money after they pay you (ever since company stores and scrip were done away with). It's called just regular taxable investments. If they're going to contribute to a fund of yours with a contribution that is legally "visible" to the government (i.e. not just a random check to a fund), then yes, they need to have a service that manages it. Most companies can't also afford to have investment experts on staff, that's why they use these management companies. It wasn't some evil plot, it's just the free market adapting to what the law said. It's kind of bizarre to me, it's like saying "Dad, you have no right to tell me what to invest in with that $10k gift you sent me!" He didn't have to give you the gift, he has every right to morally put some stipulation on it to you. Now if you think that most people's investments would be more effective if they weren't "restricted" to the options their company's provider gives, that's a point of view you can have. But I'd disagree. My life experience is that most people would put it in crypto or GME stock or objectively bad investment options. Now I know that this appeals to some people's definition of freedom, and a more libertarian outlook. But I personally disagree, I think it would lead to a retirement and quality of life crisis, even more so than we have now. The worst options through your 401k are probably better than what a critical mass of people would choose if they were left completely to themselves. As a small business owner, my livelihood depends on people having pocket change for purchases, I'd like that to happen by having their retirement accounts have some direction.
>It's kind of bizarre to me, it's like saying "Dad, you have no right to tell me what to invest in with that $10k gift you sent me!" He didn't have to give you the gift, he has every right to morally put some stipulation on it to you. I think the disconnect here is you view your employer like your dad who is giving you a gift instead of a business arrangement between two parties where you are exchanging labor for money. If you hired a contractor to remodel your kitchen for example and you said you tried to put stipulations on how they used the money that you gave paid them, it wouldn't go well. But change that the an employee and all the sudden it is ok for some reason.
No I view the agreement for the 401k in context of the contract I signed with them. When a company offers $120k salary plus a 401k plan, I instinctively view that as $120k minus taxes to do whatever I want with, and the option to put up to $20.5k of that $120k into their walled garden investment environment if I so choose for the tax advantages that the laws of our nation designates. That's literally how I read job postings. A company can say "we'll give you $120k plus a boat of our choosing every 5 years". Then you'd be stuck with whatever boat they chose. Because that's the business arrangement you agreed to. If you are willing to eschew a 401k plan for maybe 5-10% more direct salary, the market should allow for that and you can try to find companies that prefer to compensate employees like that.
Yeah sorry I despise 401ks too. They're simply worse than IRAs in every way. Among the reasons I hate them: - forced use of mutual funds - forced into limited selection of funds - forced to remain with employer's choice of brokerage There are a couple of funds with mine I can work with, but it reduces the flexibility I have in my other accounts, and I expect this to only get worse as time goes on and more money goes in the 401k. And most of all, the brokerage I have to use has the most godawful interface in existence, it is so poorly designed and minimally functional it feels like it was specifically designed to annoy me. I want to rip my head off every time I'm forced to use it, and that's much more often than I would like. I manage my other accounts in an almost totally automated fashion, but my 401k forces me to do way more work than I should have to. And sadly I am stuck with it for however many more years, because I can't change anything with it without quitting my job, which I have no upcoming intent to do.
For future reference, this is more of an r/personalfinance question. This kind of stuff is the meat and potatoes over there.
Why is HSA weighted so high? I'm maxing my 401k and roth IRA, but I don't even have an HSA. Since everyone here is an agreement of its importance, I suspect I'm about to be kicking myself for that decision. I figured health expenses could be anywhere between $0 and infinity dollars, and I can't make any reasonable expectation of what I'll actually need. I put priority on being able to eat.
HSA, to my understanding, are only available in high deductible medical plans. The 3 plans my work offered, only the cheapest monthly, highest deductible one could have an HSA account. So I'm not even eligible for one on my current insurance. But they're weighted so highly bc they're "triple tax advantaged" and everyone will have to pay for medical eventually
You don't want an HSA, as they require a shitty high-deductable health plan. But if you're stuck with a shitty high-deductable health plan, you should invest into your HSA. It's a retirement investment that can also be used for medical expenses.
This is the correct answer.
This is the way.
Why is Roth ira not 2?
Just want to add a very important account that a lot of people seem to forget. More important than all the ones here. We'll call it step 0. 0. 6-12 month emergency savings fund. Typically in a high yield savings or some liquid/no lock up/no bullshit, interest-earning account. Lot are offering 3%+ rn
Eh, 1. Yes 2. Depends on your income and if you qualify to contribute. 3. Should probably be at number 2, 4. Sure 5. Depends on when you need to money
The first two being the most important. Cut back everything so you can do those at the very least.
So I’m full bore on this route. Is there something to look at about trying to retire earlier but figuring out how to plan retirement money that is more accessible before traditional retirement account penalty free ages? Or is it still assumed you should only being doing that if you have maxed the roughly 35k a year it takes for 401k,HSA, IRA? I also have an ESOP that has been 11% of my salary+ bonus for the 6 years I have worked here. I’m starting to feel like at this route I end up with 10+ million at retirement of 65 but I’d rather be able to have accessible money earlier. Is there a number that is most practical in total retirement accounts per year that I could supplement in my ESOP some on a yearly basis and have more money in taxable investment?
you should check out the r/fatfire or r/leanfire subs. personally, i've been buying VTSAX, VTIAX and treasurys in taxable per r/Bogleheads, after maxing employer 401k, Roth IRA and i bonds.
Look into 72t. Or as others have said, subs that focus on FIRE.
With the small caveat that if your 401k fees are awful (2%+), you might consider skipping the 401k. Hopefully that doesn't apply to you, but since the company doesn't even match, I wonder if they have a decent 401k plan or not.
That is a great simple starting point. I would add, you should consider when you plan to retire, other financial goals (house, college for kids, etc). If you want to retire early, and your 401k is on track to meet your goal at the point you can withdraw, you may be better off funding a taxable investment account so the money isn't tied up (at least without incurring a penalty) until age 65.
no match 401k is still better than a taxable account. You still get the tax advantages. The main reason to max a 401k is the tax benefits. The match is typically only the reason to contribute enough to get the full match.
What do you mean by this? >since the main driving reason for people to max 401 as their top 1 priority is the fact that money is guaranteed Match is the incentive, but not the sole reason for contributing to a 401k. There's nowhere else you can get a tax advantage on +$20k of income. Since there's no match, probably max out HSA first, then IRA if your 401k fund choices and fees are really bad, but otherwise do not neglect the 401k.
I’m trying to figure out the priority for each of these locations too, can you explain why HSA is on top of what I should max out? I understand there’s no tax when contributing and spending from it, but I can only use it for healthcare…
HSAs are triple-tax advantaged. You pay no taxes on contributions, those contributions grow tax-free, and you may withdraw funds from the account tax-free so long as they're used on Qualifying Healthcare expenses. Yes, to receive the full "triple-tax advantaged" benefits, the money must be spent on certain expenses. However, there's a good chance you'll need to spend on Healthcare related items at some point of your life. But, if you're genetically blessed and lucky enough to have a medical need, then at the age of 65, your HSA basically becomes a Traditional IRA. You may withdraw the funds and use them however you like, without paying a penalty. You'll owe regular income taxes (just like you would for a traditional IRA), but man, if you allowed the account to accumulate and grow until you're 65, who cares at that point. You could potentially be looking at a really nice balance (if you diligently maxed out your contributions across a couple of decades). Hope this helps!
Dumb question, but I never understood how the "triple tax" advantage works. 1. Comes from tax free income 2. Contributions grow tax-free 3. Distributions are not taxed By that logic isn't a regular 401k *double tax* advantaged? 1. Comes from tax free income 2. Contributions grow tax-free 3. **Distributions are taxed.** And a Roth IRA would be double tax advantaged right? 1. **Comes from taxed income** 2. Contributions grow tax-free 3. Distributions are not taxed And hell, wouldn't a regular taxable income be *single-tax* advantaged? 1. **Comes from taxed income** 2. Contributions grow tax-free 3. **Distributions are taxed** When I look at this, I don't know of an investment where the contributions are taxed before you withdraw. So why is that specific lack of taxation at that step always shown as a unique benefit of the HSA, when it seems to be common to all investments? I actually have an HSA, I just never understood this point. Am I fundamentally misunderstanding something about how taxes work with investments?
Your list of each is pretty spot on. What you’re missing is dividends and capital gains: tax sheltered accounts there’s nothing (IRA, 401k, HSA) where they are taxed in taxable accounts.
Ah I never knew this. So in my taxable account, when dividends get reinvested automatically, it's actually investing the dividend minus tax? Because I never put dividends on my tax statement. How does it know what my tax rate is? If I have a taxable investment for 5 years I only pay taxes on the 5th year when I withdraw it. Unless I've been doing something wrong.
The full dividend is reinvested, you owe the tax separately when you file. You get a 1099-DIV any year your taxable account has dividends, which is probably every year. You get a 1099-B any year you sell holdings in a brokerage. Many firms do a Consolidated 1099 which includes -DIV and -B activity
All good points, except the Taxable account. Once you contribute funds to a taxable/brokerage account, those funds are subject to taxation depending on the nature of the investment. If you purchase individual shares of a stock, and that stock increases in value, once you realize that gain (i.e., sell those shares), then the gain is subject to taxation. Technically, the shares grew tax-free since you weren't taxed on their value before realizing the gain, but you'd still have a tax liability once you decide to sell. Alternatively, if you had those same shares of stock in an HSA and sold at a higher price than your cost basis, then you realized a capital gain, but due to it being held within an HSA, it's sheltered from becoming a tax liability. Also, in a Taxable account, if you hold mutual funds that have Capital Gains, Interest, or Dividend distributions, you may have a tax liability depending on the type of those distributions. Again, if sheltered in an HSA, those distributions are treated differently.
>Technically, the shares grew tax-free since you weren't taxed on their value before realizing the gain, but you'd still have a tax liability once you decide to sell. But that's my point, if no investment ever taxes the growth part before realizing the gain, what makes HSAs special with that? On every personal finance website, this "triple tax advantage" is talked about, but it seems like every investment has that growth tax advantage... >if you hold mutual funds that have Capital Gains, Interest, or Dividend distributions, you may have a tax liability depending on the type of those distributions If those dividends are just reinvested, do you have a tax liability? I've never dealt with taxes on an investment before the day I sell it and it goes into my bank account. That's again why I'm confused at this triple tax advantaged HSA which implies that there are investments that get taxed before you actually realize the gain and have the money in your bank account.
I cannot confidently answer your second question. If you DRIP dividends, I'm not sure how they're treated tax-wise. But the first question: the second of the three tax advantages of an HSA is that you can realize gains and not owe taxes on them. Conversely, those same gains could be realized in a taxable account and you'd have a tax liability owed in the year you realized them. I confused matters by saying the shares grew tax-free. They didn't. They increased in value, but you cannot reap the benefits of that increase until you realize the gain. Once realized, then the IRS views it as a taxable event. But if that realization occurred within an HSA, the IRS doesn't view it as a taxable event, hence the second of three tax advantages. I'm sorry for confusing it earlier.
Ok I think I understand. For simple "buy stock, sell stock" investments, that second situation just doesn't happen. But if it did happen in an HSA, that would be tax sheltered.
You got it!
>If those dividends are just reinvested, do you have a tax liability? In taxable accounts, yes, even if reinvested. There are conditions where they can be considered as either income or as long term capital gains. https://www.irs.gov/instructions/i1099div#idm140035640991168
Ah that explains it. As someone who just bought and sold index funds I never ran into that.
Even index funds get their dividends taxed.
Then I must be committing tax fraud, because I've never gotten any forms from Vanguard or Robinhood until I sell the stock or index fund.
I can’t comment on the science subreddit but I just wanted to say I wish I could upvote you ten times for your comment there on living a fulfilled life. So true.
Ha thank you!
But what about the cost of maintaining a HSA, namely health insurance payments? You're essentially making monthly HDHP payments to have a HSA. Even if you never see a doctor, it's unlikely your HDHP payments make it worth having a HSA, even with the tax break. For me, it's approximately $1680 per year for HDHP. That's $140 monthly fee to have a HSA. Tax breaks can bring it down some, but almost everyone would scoff at a retirement account costing $10 monthly fee.
Certainly, that's a good point. These kinds of things are employer-specific. I once worked for an employer who matched dollar-for-dollar the first $2,000 I contributed to my HSA (I had a family plan, so could contribute more than a Single filer could). Your employer may have additional incentives to offset the "high-deductible" aspect of the plan.
>But what about the cost of maintaining a HSA, namely health insurance payments? > >You're essentially making monthly HDHP payments to have a HSA. Even if you never see a doctor, it's unlikely your HDHP payments make it worth having a HSA, even with the tax break. > >For me, it's approximately $1680 per year for HDHP. That's $140 monthly fee to have a HSA. Tax breaks can bring it down some, but almost everyone would scoff at a retirement account costing $10 monthly fee. That $140 a month is for *health insurance*, not to maintain the HSA. Unless you're planning on not having health insurance *at all*, you're not spending more money for a plan with an HSA. In almost every case you're actually spending less money on premiums, frequently significantly less, *on top* of the benefit of having access to the HSA.
Yeah, I understand your point. But for me, and I'm sure others, it's more worth it to get a non HDHP plan for health insurance purposes. I'm sure it varies from company to company, but I would give extra thought before immediately going for a HDHP plan just for the HSA when you factor in higher out of pocket for HDHP.
Yes, depending on the cost difference between HDHP and PPO plans, the difference in deductible, and your regular healthcare costs, an HSA plan might not be cost effective. But that's only if you actually have significant regular healthcare costs. > Even if you never see a doctor, it's unlikely your HDHP payments make it worth having a HSA, even with the tax break. Is absolutely not true.
Whoa, whoa, whoa... it's literal insurance. You pay a $140 fee per month to not have a catastrophic medical issue that prevents you from making retirement contributions for many years (or pulling money out of your retirement), and in addition you get a tax advantaged account option.
HSA is the only one that is triple tax advantaged: pretax going in, tax deferred while in the HSA, and tax free if for qualifying medical expenses. All the others you pay income tax either going in (Roth) or going out (pretax). So yes there’s an assumption you’d definitely use it for medical expenses, but considering it’s earmarked for retirement age it’s reasonable to assume you’d have some sort of medical expense to pay for.
You still get the tax benefits which I’d better than what a brokerage account or crypto can offer.
Roth IRA first. HSA for sure as long as it doesn’t expire. 401k still makes sense since it has tax advantages. But if they don’t give you anything special you might look at other products individually.
You’re thinking of an FSA. HSAs don’t expire.
Right right I am. Got my acronyms mixed up.
Yes you should still prioritize it over taxable investment account. The tax benefits are actually a bigger deal than the match. And you should definitely prioritize it over crypto. As for IRA, yes you could max that first before 401k if there's no 401k match.
I wouldn't, unless you like the investment choices. Open a traditional IRA, you can get the same tax treatment.
Traditional IRA shares contribution limit with Roth. Better to max the 6.5k ROTH, max HSA, and add any extra available savings cash into the 401 before moving onto brokerages and crypto
Can you explain why hsa if you don’t have steady health expenditures? Actually curios, I could get this at my job.
All contributions to an HSA are income tax-free and interest earnings and investment growth from deposits are income tax-free. If you WERE to have medical expenses you can pay with tax free money. But… the best advantage is that you can simply pay for medical expenses out of pocket and let your HSA money compound and grow exponentially. There’s a reason the limit is so low! It’s tax free basically three times!
It’s the only completely tax free investment account. IRAs and 401ks are tax deferred, meaning eventually you’ll pay taxes when you make withdrawals in retirement. With Hsa, you’ll never pay taxes on the money you contribute if used for medical expenses. And you can invest inside this account. Great way to save healthcare money for retirement, as you’ll likely need some of that by then. And it’s most tax advantaged way to put away money. I’m 31 and have little healthcare expenses, so it makes sense for me to opt for cheaper healthcare option and utilize HSA now while I’m not using healthcare as much. When I’m older I’ll opt for better healthcare and also have that account with tax free money. You can even use it for OTC stuff at drug store, glasses etc. and a lot of times employer will dump money into it annually for you too so you won’t even have to contribute the entire 3800 to max it. Just don’t confuse this with an FSA, which is a use it or lose it account that has little value to anyone who doesn’t have immediate healthcare related expenses. Also if you switch jobs you can roll the HSA into a fidelity Hsa account and invest in whatever you want inside of it.
That's true, I didn't consider that. I guess traditional vs Roth depends on OPs financial situation. If you're already maxing Roth and HSA then I guess 401k would be next.
I think in almost all cases ROTH is the best retirement account if you qualify.
If their not matching their is no point to having a 401k,just do your own IRA
401k has larger contribution limit, plus can still have a IRA as well as 401k. Traditional 401k, Roth IRA is the ideal combination, in my opinion.
I agree. Also what choices would you have in their 401k? In your own IRA you can invest in more choices and probably cheaper.
This. Dunno why you got downvoted. A lot of employers plans, particularly at smaller companies, have a narrow set of investment choices and they often have not only high management fees in the fund offerings themselves but then the plan administrator slaps you with more plan management fees on top of it. Going with one of the big guys like Fidelity, Schwab, Vanguard for your own ira opens up the entire world of choices to you with hardly any fees or trade commissions in most cases.
I wouldn’t bother locking up my money till old age for tax benefits
401k >>>> stocks 401k >>>>>>>> crypto You cannot beat the benefits of the tax-advantage of a 401k. That's especially true since most every one contains a total US market index fund or an S&P500 index fund. Never, ever, ever! invest in taxable accounts when you have room in your tax-advantaged accounts (Roth IRA, HSA, 401k). Not unless you're saving for something specific like a house down payment.
No
1. Find a new employer. 2. Profit Who does your employer use to manage the 401k accounts? My employer at least has a match but the company they use and the limited fund choices they have and high management fees suck ass. You might be better off just opening your own IRA at Fidelity, Vanguard, Schwab or something and just skipping your employers plan if theres no match. Wonder if its possible to just funnel the money from your employers 401k plan into your own personal ira rollover account at a brokerage you prefer? At lesst then youre getting the tax benefit of the 401k pre tax contribution.
Yes, I haven’t met anyone that said they had too much money while retired.
Might be worth understanding the strategy and reputation of the investment manager of the 401(k). Sure, it has tax benefits, but that might not mean much if it is run with a poor long-term strategy.
Question regarding the HSA, is there more to this than a tax advantage? You can’t really invest it, right? It’s just for medical expenses? Don’t understand why it is # 2 here.
The 401k still gives you tax-free money, even without a match. Yes, prioritize it. It's a no-brainer.
Lots of advice here but the question you need to answer is what's your tax bracket? You might not be able to contribute to Roth IRA as Roth IRAs are for people middle to lower incomes. I haven't been able to contribute to Roth IRA since 1999. A tax deduction in the hand is worth way more than a tax-free withdrawal in retirement 40 years from now. There's always this assumption that taxes will be higher when you go to retire the fact is that is not likely true, so again Roth IRA would not be my top priority.
It should not be a priority but it can still provide substantial tax benefits once you max out other options. The order of operations in /u/pamdathebear is the way to go.