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Max the 401K or go with other investments
Old 12-31-2013, 01:25 PM   #1
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Max the 401K or go with other investments

I've got a job with a great 401k match (but sadly isn't paying me 7 figures yet) that allows me to put in up to a maximum percentage of my income. Which is great... except that it won't let me hit the $17,500 cap when I go "all in" with my paycheck deductions. After talking to some people I figured I could open a second 401k on my own and simply do rollovers every quarter or so into my main account to hit the yearly allowable maximum contributions. Currently I have pegged additional money I have for after tax investments and my Roth IRA.

As someone who has at least 25 years to go would it be wiser to max the 401k or keep some funds in after tax investments for a mixture of before and after tax assets, especially with the idea of retiring several years before 59.5? Roth will be funded to the max either way.

Decisions Decisions...
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Old 12-31-2013, 10:25 PM   #2
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I'd definitely watch your retire before 59.5 needs and work on a taxable account for that.

I'm not sure how the second 401k idea would work, unless you have self employment income and can open an individual 401k.
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Old 01-01-2014, 10:37 AM   #3
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That is true, I guess I didn't realize that the "rules" would get in the way. Oh well, looks like I'll be investing in other sources then!
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Old 01-01-2014, 12:17 PM   #4
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Some of it depends on your tax bracket. I was worried about having too much in my 401, because I worried that if I got laid off for an extended period I would end up paying tax penalties to access the money.

However, since I was in the 28% bracket, I realized that if I got laid off, I would be paying a max of 15% (and probably lower). Even with the 10% penalty, I would have still been paying less in taxes.

So I maxed the 401k without worries.
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