So if you put away 53k for yourself into the 401k and that is 80% of the contribution you contribute 13.25 k for the staff (lets assume that includes all fees as well).
The other option of a SIMPLE you put away 18.5k and zero contribution for staff. (3% match but guessing most staff wouldn't bother with this)
so by doing the 401k you're paying 13.25k to put away an extra 34.5k, right? 13.25/34.5 =38%. Wouldn't I be better off paying the taxes now (I'm in the 33% marginal bracket and no state income tax) and putting the money in a taxable account?
In my example I'd be paying a 38% fee for the right to defer taxes. lets say I take out 200k/yr at retirement. that would be an avg tax rate of about 25%.
If I pay a 33% tax now then I have to pay longterm cap gains tax of 15% when I withdraw at retirement. And if I invest in a tax efficient way (like all VTI) dividends would be very low, about 2%/yr which is also taxed at 15%
I must be missing something, right? Why would anyone start a 401k if my assumptions are accurate?
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