It seems sacrosanct that one should max out tax-advantaged accounts before taxable ones. But I wanted to look at things the other way.
If you have a match in a 401k/TSP, then I think it 100% makes sense to contribute to that amount. But what about beyond it? Has anyone ever made the argument that taking the tax hit now to keep your funds fully liquid is worth it? Example below:
I can contribute up to $18,000 a year to a TSP as a federal employee. The match tops out around $4,000. So let's say I only do the 4k to get the match.
If I took the other 14k, I'd be taxed at the 28% rate due to my earnings level. But once that money is in VTSAX, I can use it whenever. Obviously I'd want to wait at least a year to pay long-term capital gains instead. I am unsure how many years of "average" returns I'd need to get back what I lost in taxes, but I am sure there are calculators for that. But rather than having to thread the needle on rolling over to a Roth, it is just already in taxable accounts and if things get crazy, can be used without a huge penalty.
But a post that the Mad Fientiest had about how maybe just paying the 10% penalty to access TIRA funds can make sense in some scenarios. But you still pay tax on that.
So, I don't know. What do you all think? I feel like there have to be early retirement scenarios where hitting your FIRE # through brute dollars contributed to taxable funds can be worthwhile due to the increased flexibility.
Otherwise, say I need $500,000 and I have $150,000 in a TSP/401k/TIRA rather than everything but the match in a taxable account + Roth IRA. It seems to muddy up the actual FIRE number a bit. Just throwing this out for discussion as it seems a lot of topics get repeated and this one seemed new :)