Read this:
http://www.madfientist.com/retire-even-earlier/
Summary:
As you can see, it’s possible to retire over two years earlier, simply by taking advantage of common retirement incentives and tax-advantaged accounts! It’s pretty amazing that he can take years off of an already short working career without earning more, spending less, or taking on any additional risk!
Eric, I'm not trying to be snarky here. This is a serious question.
Did you read the original post? The OP is specifically asking if a
high fee 401k is worth using. One that has 2% in fees. A 2% expense ratio is incredibly expensive. The Mad Fientist post assumes that the 401k fees aren't egregious
Compare these two scenarios:
Scenario 1:
Bob is in 25% marginal tax bracket while working
$18,500 contributed to 401k in year 1. Let's assume Bob earns 80k so the 3% match is an extra $2400. Invested in a US stock index fund, which returns 8% before and 6% after expenses.
After 30 years, the 401k balance is now $120,038. Let's be generous to the 401k scenario assume this is withdrawn over a period of several years at a 10% marginal rate. Then the after tax withdrawals is $108,035.
Even if you want to assume that all of this is withdrawn at 0% through Roth conversions, you'll see that this is still inferior to scenario 2.
Scenario 2:
Bob is in 25% marginal tax bracket while working
To make this comparable with scenario 1, $18500 in pre tax money is $13875 in post tax money. This amount is invested in a US stock index fund which retunrs 8% before and 7.95% after expenses.
After 30 years, the taxable account balance is $137693. This is withdrawn at the 10% marginal income tax bracket, which is the 0% LTCG tax bracket. Hence the after tax withdrawals is $137.693.
With the above assumptions the taxable account is clearly the better choice. However, as I said in my first comment, this implicitly assumes that Bob will remain at his job for 30 years, preventing him from rolling his 401k over to an IRA at Vanguard or similar to reduce the expenses.
ETA: Idk why I chose 18,500 instead of $18k, when the 401k max is $18k. Regardless, it doesn't affect the conclusion