zlacker

Roth 401(k)’s are actually worse here. Unlike 401k’s it use post tax deposit so there’s zero tax advantage upfront. You also need to both pay taxes and a 10% penalty on early withdrawal of any gains, so it’s a significant risk with minimal upside considering the low rates of capital gains.

There’s nuances around things like divorce, but people overlook just how tax advantaged traditional investments currently are.

>>Retric+(OP)
Why do you keep bringing up early withdrawal? It's like saying crypto zoo is a bad investment. Yeah, it is. Don't do it.

>>sidewn+f2
Because my point was people shouldn’t limit their savings to these systems.

I’ve seen far to many people lose thousands and some tens of thousands by doing so.

>>Retric+T5
You're sort of right but for the wrong reasons. Early withdrawal penalty is not the only problem.

People only need to crack open the piggy bank when shit hits the fan. During those times (layoffs, etc.), the value of what's in the pig is probably depressed to begin with. So your hypothetical scenario is actually worse than you're suggesting, since you pay a 10% penalty on depreciated holdings.

If you legit need the 401k money, they do allow some circumstances for hardship withdrawal penalty free. You just have a higher tax liability that year.

But yes, don't use your 401k for general savings. Depending on your credit you are better off taking out a loan against it.

>>clown_+Xa
Yep, though the nuance is again important. Hardship is a tricky thing because being able to max out a credit card or get other loans including ones under terrible terms means many otherwise hardship situations don’t qualify.