401 K Contribution Advice

[rn53982]

All,

Although I have been contributing through my 401 K at work for several years now, I must say that sadly my strategy has been to just throw money at it.  Now that I have been introduced to MMM, it has really made me to rethink everything and really start to look at what I need to do to achieve financial independence.

Currently my company 401 K matches 100% up to 5% and my current contribution is 15%, which I have been thinking about increasing.  However within our 401 K, there are limited options to choose as far a distributions.   Am I better off only contributing the matching 5% and investing the rest elsewhere, or should I contribute as much as possible since it is pre-taxed income?

Thanks and excuse my ignorance on the subject. 

[RyeWhiskey]

Do you have a Roth IRA? An HSA? You may consider maxing these out before going above the match in your 401k. Also, we'd need to see the available funds in the 401k, complete with expense ratios, in order to make a good call on the whole situation.

[notsofast]

At the end of the day it comes down to what your current tax rate is versus expected tax rate when it is time to withdraw from the pre-tax savings vehicles.   We max out 401(k) then if we have enough we contribute to roth's and then if we have money left after that we split left overs between taxable accounts and paying down mortgage.  We are in the 33% marginal tax bracket so my thought is we can surely lower that in retirement.

Another thought would be to not pay attention to tax rates at all and just max out 401(k) before you can get your hands on it and spend it (some people have problems with that!). With SEPP, Roth conversion and other methods to get money out of 401(K) and/or ira roll-over, there is a pretty good argument to be made that you won't have a problem accessing those pre-tax accounts prior to age 59.5.