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Should You Shoot For Higher Returns By Investing Outside Your 401(k)?

FYI: Q: I'm just starting my career and my 401(k) is invested in a diversified portfolio of stocks that tracks the overall stock market. I'm trying to decide whether to simply increase my contribution to my company plan or start investing outside my 401(k) so I can earn a higher return by focusing on specific sectors of the market, such as technology or health care. Which do you recommend?

A: Generally, I think you're better off doing your retirement savings within your 401(k). You get lucrative tax benefits and employer matching funds in most cases, plus the automatic payroll deductions ensure that you actually end up saving for retirement rather than planning to but not getting around to it.
Regards,
Ted
https://www.fidelity.com/insights/retirement/investing-beyond-401k?print=true

Comments


  • Disagree --- one should invest in whatever type of accounts they have the opportunity to invest in - 401, 403, IRA/Roth IRA, deferred, taxable. While it's probably ok for someone to just throw their 40X into a TD fund and be done with it, I believe that anyone who says primarily invest in your retirement account -- which implies ignore taxable accounts -- is crazy since there are caps on a) contributions and b) what you might have access to in terms of funds and expense ratios.
  • rforno said:


    Disagree --- one should invest in whatever type of accounts they have the opportunity to invest in - 401, 403, IRA/Roth IRA, deferred, taxable. While it's probably ok for someone to just throw their 40X into a TD fund and be done with it, I believe that anyone who says primarily invest in your retirement account -- which implies ignore taxable accounts -- is crazy since there are caps on a) contributions and b) what you might have access to in terms of funds and expense ratios.

    I understand your argument with (b), but (a)? If your income is large enough to be able to max out contributions to your 401(k) and IRA ($24k next year), you really shouldn't be too worried about money.
  • edited October 2017
    JoJo26 said:


    I understand your argument with (b), but (a)? If your income is large enough to be able to max out contributions to your 401(k) and IRA ($24k next year), you really shouldn't be too worried about money.

    IRA contributions are still 5500/6500 and in my view are generally useless compared to the 18K+ in the 40X accounts....it should be a similar amount, in my opinion. What I meant to say was that sure, if you are able to max out your 40X good for you -- but that shouldn't mean that one ignores investing more $$$ in a taxable account anyway if they're able to.
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