Author Topic: 401k and Roth IRA Question  (Read 941 times)

Svoboda

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401k and Roth IRA Question
« on: December 21, 2016, 12:50:07 AM »
Hi all I have a question regarding investing in your companies 401k or Roth IRA plan which I hear about all the time. I'm not from the United States so we don't have these plans in our country.

My question is if the goal is early retirement, why max out these accounts each year if you can't access the money before 59 and a half? Why not put it into index funds where you can eventually live on the returns when you retire years earlier?

Is this because of the tax advantages and employer contribution which is basically free money?

Cheers

somers515

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Re: 401k and Roth IRA Question
« Reply #1 on: December 21, 2016, 01:39:34 AM »
My question is if the goal is early retirement, why max out these accounts each year if you can't access the money before 59 and a half?

Is this because of the tax advantages and employer contribution which is basically free money?

I had the same initial question when I first started reading MMM.  The answer is that there are ways to access the money before 59 and a half.

http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

The answer to your second question is yes.  The tax advantages and employer contributions are very significant.

biglawinvestor

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Re: 401k and Roth IRA Question
« Reply #2 on: December 21, 2016, 04:38:48 AM »
My question is if the goal is early retirement, why max out these accounts each year if you can't access the money before 59

Good advice from @somers515 above. The truth is that you can access that money early. You may also find this post interesting from Root of Good where he talks about putting together a Roth IRA Conversion Ladder:

http://rootofgood.com/roth-ira-conversion-ladder-early-retirement/