Is it possible to have TOO MUCH of ones net worth tied up in a 401k account? I know people who have been contributing the max each year (and not managing to save much else for their taxable accounts) who have 70-80% of their net worth tied up in a 401k. Then they can't even put 20% down on a house purchase because they don't want to pay penalties to take that money out of their retirement account. To me, there seems to be some risks with this.
1) What if something comes up and you need the cash? Early withdrawal is a 10% penalty in addition to taxes.
2) What if taxes are higher when you retire? in 1983 the tax rate for income exceeding $34,100 (~80k in todays dollars) was 40%. Historically speaking, our taxes are low right now, especially compared to european countries. What happens if taxes take a turn significantly higher?
Because of this it seems like a roth is more advantageous. I would be very nervous having a large chunk of my net worth tied up in a 401k
Submitted January 12, 2019 at 08:43PM by panchilly http://bit.ly/2H791WV
