I Don't Undertsand (Now vs Later Money)

[clumlee]

After reading the blogs and listening to interviews, etc. It's obvious that the wisdom is to fund a 401K, Roth IRA, etc. and then fund a taxable account after.
But here's what I'm stuck: I look at 401K (in my case I have a 457b) and the Roth IRA as "later money"- which isn't a knock on those, btw. While I do fund these, I also have a taxable account which I see as "now money" because it's accessible and pays me dividends monthly/quarterly.
So for people trying to get to FIRE faster wouldn't it make more sense to pile in to the "now money" account and sparingly fund the "later money" account since you could presumably make it to FIRE before the age where you an draw the 401K and/or Roth IRA?

Thank you!

[MDM]

So for people trying to get to FIRE faster wouldn't it make more sense to pile in to the "now money" account and sparingly fund the "later money" account since you could presumably make it to FIRE before the age where you an draw the 401K and/or Roth IRA?

You might consider How to withdraw funds from your IRA and 401k without penalty before age 59.5.

[nexus]

Mad Fientist ran numbers on this situation, showing that in the end it is more efficient to use tax-deferred vehicles to reach your number, then use the Roth conversion ladder, or SEPP (structured equal periodic payments). Max out 401k, Roth, HSA, and Roth 401k if your employer offers it.

However, it comes down to personal preference. One of the nice things about putting money in a taxable account is that it can essentially function as an emergency fund if sh*t ever hits the fan. Having the money accessible isn't a bad thing if you're also uncertain with your job security. Please be ware that you're adding after tax dollars to this account and it'll be taxed annually as well whereas the 401k and ROTH are not hit as hard/not taxed until withdrawal*. What this means is that you'll have a longer working career while you fight the tax monster to hit your number.

The tax efficient way requires more planning and work so if you're lazy or bad at planning, it may not be right for you.

*even that can be avoided if your income is low at the time of withdrawal. Again, planning...