When A Non Tax Deferred Retirement Plan Is A Good Choice

401(k)’s are popular with many Americans due to the appeal of a lower future tax rate, comparative simplicity of the plans, and free money through employer matching. However, not all people will benefit from a a pure 401(k) retirement plan in the following situations:

• When savers need to access the money in an emergency before reaching age 59 1/2 which will result in major tax penalties.
• Mandatory distribution of funds after age 70 1/2 may not be in the interest of the saver at that age.
• The taxpayers bracket may be higher in the future due to increase in income or congressional action.
• Contribution limits in small companies may curtail the ability to put larger sums into the 401(k).

See Ann C. Logue, 4 Reasons To Save for Retirement Without A Tax Deferral, Forbes, June 5, 2015.