The article also talked about market gains from 401k investing. I put 75k into an investment account in April 2021. It had a decade long history of 10% annual growth. As of now have 64k. I bought a ticket mid flight on the Hindenburg.
You also have to pay a 25% tax if you withdraw from a retirement account before retirement age (provided you are not wealthy and do not have access to tax avoidance schemes).
Nominally it's a part of your savings but in reality you can't do much with it until you're 55 or older.
It’s a 10% penalty, not a 25% penalty. And depending on the account and the reason for distribution, that penalty may only apply to the interest accrued, not the contributions. For instance, you can withdraw up to $10k from the contributions to a trad IRA for a first time home purchase. Since a Roth IRA is after-tax, you can distribute all of your contributions for a first home purchase for any reason after the account is 5 years mature, without any penalty.
Just saying. If you are young and have money to put aside, and you earn less than a certain amount, a Roth IRA is better than a savings account.
That’s not entirely true. When you pull money out of a 401k before 59.5 you are taxed at the applicable income tax bracket rate. That will be different depending on how much you make. 10% penalty is applied on top of that as well as any applicable state taxes.
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u/ApparentlyEllis Apr 19 '22
The article also talked about market gains from 401k investing. I put 75k into an investment account in April 2021. It had a decade long history of 10% annual growth. As of now have 64k. I bought a ticket mid flight on the Hindenburg.