The Cellar - View Single Post - talk about legitimate ways of sheltering money

glatt · 09-21-2007, 02:04 PM

Am I stupid for putting my money into a 401K instead of a regular mutual fund?

I mean it's tax deferred, which means I have a bigger pile of money earning returns than if taxes had come out of it. Sounds good so far. I get that. That's a big bonus.

But when I retire, I will have to pay tax on what I take out. Seems only fair. However, my house will be paid off then and my dependents will all be off on their own.

So I won't be able to take anywhere near as many deductions as I do now, and I will be taxed at a higher rate than I am now. Won't that higher tax rate cancel out any benefit that the pre-tax 401K gave me? Is there any way to calculate that? Is the entire 401K idea a huge fraud perpetrated on our generation?

09-21-2007, 02:04 PM	#7
glatt ™ Join Date: Jul 2003 Location: Arlington, VA Posts: 27,717	Am I stupid for putting my money into a 401K instead of a regular mutual fund? I mean it's tax deferred, which means I have a bigger pile of money earning returns than if taxes had come out of it. Sounds good so far. I get that. That's a big bonus. But when I retire, I will have to pay tax on what I take out. Seems only fair. However, my house will be paid off then and my dependents will all be off on their own. So I won't be able to take anywhere near as many deductions as I do now, and I will be taxed at a higher rate than I am now. Won't that higher tax rate cancel out any benefit that the pre-tax 401K gave me? Is there any way to calculate that? Is the entire 401K idea a huge fraud perpetrated on our generation?