What's better than the 401(k)?
Tuesday January 20, 2009
A recent Wall Street Journal story posed the question Do 401(k) plans still make sense?
With the months-long recession and bear market in full swing, it's no wonder many Americans have begun to accept the implications of their dwindling 401(k) balances on their retirement outlook. Short of the return of defined benefit pensions (which seemed impossible for companies to accurately account for and fully fund), is there a better way? What is it? Bonus points if a Congressional aid reads it here and takes it to a meeting!
With the months-long recession and bear market in full swing, it's no wonder many Americans have begun to accept the implications of their dwindling 401(k) balances on their retirement outlook. Short of the return of defined benefit pensions (which seemed impossible for companies to accurately account for and fully fund), is there a better way? What is it? Bonus points if a Congressional aid reads it here and takes it to a meeting!
Roth gives free withdrawals of contributions (not earnings) prior to 59 1/2, no tax in retirement (will taxes go up or down?), no tax when die and pass to heirs.
so… what is better than the 401k?
The tax-free element of the Roth is hard to beat. Still, we have no idea what future politicians could do to the definition of tax-free. That possibility, along with benefits of automation that come with a 401(k) lead me to believe that the best approach is to take advantage of both.
The 7702 Private Plan is far superior to any 401k. Better liquidity, possibility to earn market based gains without the possibility of market losses(with the equity index strategy), built in permanent life insurance and more. Income from a 7702 Private Plan is based on insurance law (supreme court tested) allowing for tax free income and further, the income from a 7702 Private Plan does not trigger taxation on Social Security income.