Been in my career for about a decade now and have never enrolled in a 401k plan. I believe my current employer will match up to 3% of my income, if I contribute the max. Given my income, I would not be able to use 401k contributions to lower my AGI on taxes.
My income is too high to contribute to a Roth IRA.
With that being said, I have been saving for my own retirement (or whatever else) in a "plain vanilla" brokerage account. I'm stashing away FAR more than the 401k contribution limit + employer match. My rationale is that I would like the freedom to do whatever I want, without paying attention to retirement age, having more investment options available (e.g. real estate), not having to worry about tax implications, etc. Goal is to retire by 50 or 55.
To me, there is value in having immediate liquidity and the option to increase/decrease my "contributions" on a whim. I realize the importance of staying disciplined and not raiding my brokerage account without strong reason.
Should I switch employers, which I believe I inevitably will, there would be no administrative hassles with moving or tracking seperate accounts/plans. It's nice having all my assets consolidated in a few places, instead all over the place.
What am I missing by not participating in a formal retirement plan? Maybe some degree of personal asset protection (i.e. lawsuit/divorce)?
Which financial company do you work for that only offers 3% matching? That seems a bit miserly to me for banking.
I think most of your analysis is spot on, I am in a similar situation because I'm not eligible for Roth and I make too much for the tax benefits of an IRA and I don't like the IRA lock-up either. So I too manage my own investments. However, I still participate in the 401k because my employer matches 6% and you are essentially getting a 100% return on that money. Plus, if your company offers a stock purchase plan, it's usually a requirement to do it via the 401k (and I buy that stock too). So for those two reasons I do participate but again, I think most of your analysis (especially the ability to direct that money to whatever investment you want) is spot on.
One thing I forgot to mention is that you can also do loans against a 401k. So while your money is locked up until retirement, you can still borrow from it if you ever need a cash injection and pay a very reasonable rate - and you're the beneficiary of the rate! I think of it as capping the interest I will ever have to pay since I'll never need to take a ridiculous loan out for the rest of my life, I can always just pull from my 401k at a reasonable rate and pay the interest to myself.
I believe my company matches 100% of contributions up to 3% of total comp. If your company matches only 50% up to 6% of comp, it's essentially the same thing.
I know you can borrow against your 401k, but I believe there are limits and it's quite a technical process. If you don't follow all the rules accurately, you could end up getting hit with penalties that go to Uncle Sam.
I don't think you pay the interest to yourself......you would pay interest to whichever company fronts you the money.
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don't you still eventually pay taxes once you start withdrawing? I'm contributing to 401k but only because of the employer match. in terms of taxes, I rather pay 30% now than 60% in the future when most jobs will be done by robots and most people will be living on UBI.
If you think your effective tax rate will go up you should contribute to Roth accounts/ roll over to a Roth account. Then you pay the tax now but there is no tax at retirement age.
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You can do a mega backdoor Roth to get around income limit. I do it yearly
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