On most of the internet, I'm a big believer in "don't feed the troll." However, one troll in particular repeats the same wrong points on this board frequently, and I worry he'll cause someone to make a huge financial mistake.
I am entitled to my opinion and my voice. If you wish to call me a troll for intellectually debating with these recurring index fund/Max 401(k) advice threads as there are things you are leaving out that are important to discuss, then that's your choice of words. Differing opinions don't mean i am a troll. And you shouldn't label so many other's as trolls because they think differently and are just saying their opinion and may even be constructively debating with your opinions, and you fail to realize this and think your way is the only way.
There are many other taxable strategies that you shouldn't so easily dismiss that allow people reach Financial Independence, and others need to know about them as an investor, especially in investor alley here.
No, you just get kicked out of conversations because you repeat the same demonstrably false things, time and again, after being corrected. You couple this with bizarre conspiracy theories and we end up having to respond to you to prevent someone from making a massively expensive mistake by taking your "advice" on the internet.
Putting all your money into a 401(k) and IRA , to hope that a loophole to withdraw without penalty continues indefinitely is a mighty big risk at a "massive expensive mistake" for those making only $60k a year income. You fail to understand that the average american makes less than this, and they have many other choices of investments other then to max out 401(k) and be locked in to age restrictions, commercialized rollover to IRA fees, employer only chosen expensive funds sometimes, maybe no employer matching, etc. Many employers don't sponsor vanguard low expense funds or even match now a days.
See thread here: https://forum.mrmoneymustache.com/investor-alley/goal-fi-by-40-and-not-investing-in-401k-till-fi'd/
And how the moderators killed my first life.. R.I.P. FreeYourchains
That's a great thread to read - I'll be sure to link to it. Has many great rebuttals to the points you continue to make - including in the comment I'm responding to.
This thread still has unanwsered questions, but then gets to lingering topics that went unrebuttaled. It ends showing exactly how you are treated in the forums if you refuse to invest inside a 401k for Financial Independence. Dividendmantra, ERE, Brave New Life, and other financial independent investors all over, do it their own way, even outside of 401k investments, GASP!
For example:
http://www.dividendmantra.com/2013/08/why-i-hold-100-of-my-equity-investments.html#moreBut if you choose not to invest all your savings in a 401k, yes you'll be taxed more, but you'll have complete freedom to all investment types at any time for any purpose...complete Freedom..., making your own businesses, taking risks, having hard work or hard work of your money give you more active and passive rewards, etc. as you can find in taxable accounts without those pesky age restrictions on fund policies that are updated every quarter to the will of the fund managers.
(point fully rebutted almost six months ago to you. What you post is simply not true)
False again. What i post is true to many middle class financial independent investors whom focus on High Quality Dividend (or Capital Gain focuced) Investments outside of traditional retirement accounts who get the cash now to use now for extremely early retirement. Day Traders (or Month to Month), Real estate Owners and Entrepreneurs all use taxable accounts and do what they want with the
earnings at any age.
Also, not everyone makes over $85k/ a year and can do both, max out their retirement and invest outside of retirement accounts for the purposes mentioned above.
So then they chose what they wish to invest in. I am just giving the other side of the debate, saying you don't necessarily have to fully max out 401ks and IRAs to become FI at an extremely early age.
It's very easy to access the money put into a 401(k) without penalty. It requires a little bit of thinking and planning, but not much. The idea that a person who contributes to a 401(k) can't access that money before age 59.5 is demonstrably false - and has been demonstrated as such to you many times.
What you fail to understand, and I keep repeating because you and others don't understand; is that you can only withdraw your initial contributions. This is like only being able to withdraw your principal, and not your earnings from your principal. You get taxed fully plus 10% penalty if you withdraw any earnings from your IRA or 401k before age 59.5.
While this is ok to do for those that will be retiring from age 50+, it's not quite ok for those wishing to retire much earlier, or to live on their expenses off of their investment returns and earnings at a much earlier age.
Investments in a taxable account into high quality dividend growth companies or for Capital Gains earnings, allow you to live off of earnings once your principal is built up enough.
Those with middle class incomes, at a very young age, and that develop a higher savings rate into taxable accounts, can reach FI quicker without limitations or restrictions this way(except some tax brackets which have exemptions for long term investments).
As you keep telling me: Any investment (contribution) that has been rollovered into the IRA, are then withdrawn at lower tax brackets as you withdraw what you need for retirment expenses....
but all gains/earnings are kept inside IRA until age 59.5 and the "investment" ceases to exist upon withdrawal. Unlike an investment already in a taxable account, whose earnings you can live off of (limited in taxes if you are above the 25% tax bracket in America).
The design of a 401(k) - and if you're going to comment about it, designate it correctly to at least pretend you have some basic competence in the area - was for highly compensated employees to be able to defer compensation until they were in a lower income bracket. Someone figured out this could be used to make employees responsible for their own retirement planning - a huge improvement over having to work for 30+ years and hope that the company planned your retirement well.
Get out of the conspiracy theories and learn about the reality of these things, please.
It's not a consipracy theory that Governments survive off of tax income. Income taxes and sales taxes. Thus they need many workers to keep working till they die for max income, and they need many over-consumers to keep over-consuming till they die for max income.
MMM'ers or ERE'ers or DM'ers learn the basics of how to spend less to increase their savings rate and stop over-consuming.
401(k)'s are controlled by employers and government policy. They entice the middle class into contributions that are not taxed at the front end, for the exchange of locking your earnings until the age of 59.5 or they penalize your hard earned money. Thus the middle class works longer, since they can not live off of their earnings from their non-taxed investments for their lowered expenses.
As a middle class person making $60k and maxes out their 401(k)'s and IRAs, they do save on taxes over the long run; yet, these contributions' earnings are locked up until age 59.5.
You'll have to pay full taxes plus 10% penalities to access these "earnings" or returns from your investments.
401k investors are then limited to only withdrawing what they input.
Middle class workers maxing out 401k's/IRAs at $23k invested, must work about 15 years min, and must rollover each year (with rollover fees) beginning at year 10, to just be able to withdraw from their initial input or contribution or principal after a 5 year grace period. If your family expenses are at $23k/year, then you can only retire and live off of principal withdrawals for 15 years then, and not have access to your earnings until age 59.5.
Yes this is a fine if you are already age 40 and just became an MMM'er and want FI. or slightly early retirement.
But if you are age 25...it won't allow you to retire fully or at a much younger age... (unless you can go from $60k income to $120k without an investment of money. Or in other words you took a lot more student loans and time to go to Grad school at some point to reach higher incomes.)
And then you can cap it off by demonstrating that you don't know what a dividend is. We've discussed this before too. Whether you take X% of your portfolio by dividends that you spend rather than re-invest, or sell the same X% in share values, it's the same result. Dividends are simply the profit that the company isn't re-investing in increasing its value.
I know this. I say dividends to keep it simple on a more passive investment sense. Funny how the government thinks they are different and treats them differently.