Author Topic: Not maxing 401K; any point in having a taxable account?  (Read 3764 times)

Jack

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Not maxing 401K; any point in having a taxable account?
« on: February 28, 2013, 02:41:51 PM »
Given that I have no chance* of maxing out my tax-advantaged accounts, is there any good reason to invest any of my money in a taxable account?

(*Since my wife is self-employed, the 2013 combined contribution limit for her solo-401k, my SIMPLE IRA and each of our Roth IRAs is $74000, which is higher than our entire household gross income.)

sol

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Re: Not maxing 401K; any point in having a taxable account?
« Reply #1 on: February 28, 2013, 02:54:52 PM »
No point in having a taxable account unless you've calculated that you need more pre-retirement accessible funds than you will otherwise be able to save before retiring.  For most people here, that means taking full advantage of the 401k until you're five years or less from retirement.

bo_knows

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Re: Not maxing 401K; any point in having a taxable account?
« Reply #2 on: February 28, 2013, 02:55:08 PM »
Good reasons I can think about:

- Emergency fund (I consider part of my taxable account available for emergencies, rather than sitting in savings)
- Medium-term savings goals (Saving for a downpayment on a house in 5 years? Personally, I would invest in a taxable account)
- As you start to come closer to actual ER, having taxable accounts accessible without penalty is good (although, you can still set up the 5-yr-Roth-pipeline or 72t with pre-tax accounts)

KulshanGirl

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Re: Not maxing 401K; any point in having a taxable account?
« Reply #3 on: February 28, 2013, 02:56:11 PM »
I don't max out my 401k, and I have a taxable account.  Of course, I am also a total noob and a wee bruised from facepunches, so I don't even pretend to give advice.  :) My work puts 11% into my 401k without me having to contribute.  I don't like the options there as much as I like Vanguard.  The ability to access funds in my Roth and in the taxable account give me some peace of mind, even though I don't intend to access them.  I hope someday to max out a pre-tax account as well as the Roth.  After my daycare costs go away, it'll be easier to achieve that.  :)

So that's me.  *flees the investment forum*  Hehe.   

brewer12345

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Re: Not maxing 401K; any point in having a taxable account?
« Reply #4 on: February 28, 2013, 06:54:31 PM »
There is another reason to have a taxable account even if you don't start drawing on retirement accounts until after 55.  There are a lot of quirks in the tax code that are driven off taxable income, things like the taxability of SS, how much you pay for medicare, health insurance subsidies from Obamacare, etc.  It can be very, very lucrative to be able to manipulate your taxable incomefrom year to year.  A taxable account gives you lots more flexibility in doing so.

COguy

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Re: Not maxing 401K; any point in having a taxable account?
« Reply #5 on: March 01, 2013, 09:39:38 AM »
It's nice to have somewhere to tax loss harvest.  Especially if you plan on holding funds and only spending the dividends and not the principal.

http://www.bogleheads.org/wiki/Tax_Loss_Harvesting

Khan

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Re: Not maxing 401K; any point in having a taxable account?
« Reply #6 on: March 03, 2013, 05:43:48 AM »
I'm not as far into investing/maximizing returns/tax advantages as a lot of these other people, but I like the freedom that a taxable account affords. I can do anything with the money in it. Now that I've learned a thing or two, I'll be maxing my TDAmeritrade ROTH every year(and can do so for several years off of my taxable account if need be) for the tax benefits of that, but knowing that I have a couple years of funds available before starting to worry about tax treatments and early withdrawal fees in my other accounts affords me a certain peace of mind. As others said, it can be viewed as an emergency fund for anything that should need it, as a buffer to absolutely anything that could happen.

Also, it has way more options because I have full control over it compared to the company 401k, which though it offers lots of investment choices, doesn't offer me the one thing I'd jump at: a Dividend Growth fund.