Author Topic: Should I use my company's 401k?  (Read 1193 times)

John Dough

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Should I use my company's 401k?
« on: December 02, 2016, 11:50:38 AM »
Hello fellow Mustachians,

I'm 53. I have tenant income from a two family house that I live in.
It gives me enough to live on, that I can deposit $1000 a week, almost my whole check into VFIAX.

I'm wondering if I should use my company's crappy high load 401k (American Funds) to take advantage of the tax benefit?

I can retire in 2-6 years according to my math.

I have $35k in an IRA (VFIAX) and $15k in VFIAX for $50k in savings. At 4% that's $166 a month I can withdraw.

I need about $500 a month, so require $150k in savings, which I can save up in 2 more years.

Since I'm over 50 I can do $18k a year plus $6k catch up for $24k into my crappy 401k per year for perhaps a good tax savings on a $90k/year income that would make up for crappy 401k rates.

Or or continue with $6500 into my IRA and the rest into VFINX.

I can draw from my IRA at 59.5 years old.

Need help to think this out.
« Last Edit: December 02, 2016, 12:05:04 PM by John Dough »

MDM

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Re: Should I use my company's 401k?
« Reply #1 on: December 02, 2016, 12:44:54 PM »
See http://forum.mrmoneymustache.com/investor-alley/investment-order/, which includes:

If your 401k options are poor (i.e., high fund fees) you can check           
   http://forum.mrmoneymustache.com/investor-alley/to-401k-or-not-to-401k-that-is-the-question-43459/         
for some thoughts on "how high is too high?"           

dave__

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Re: Should I use my company's 401k?
« Reply #2 on: December 02, 2016, 04:37:35 PM »
We need a bit more information. What is your marginal tax rate? It mainly comes down to whether your tax savings will outweigh the expense ratios on the funds. In most cases, they will. Plus once you leave the company you can roll the 401k into your IRA with [presumably] lower fees.

kpd905

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Re: Should I use my company's 401k?
« Reply #3 on: December 02, 2016, 05:37:45 PM »
Do they offer any match?  If you plan on retiring in a few years you might be fine even with high fee funds, since you'll be able to roll it over soon.