FWIW.
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We do not think you're ready to use your brains independently just yet.
Between myself and my spouse, at 6 different employers our 401k's/403b's have consistently offered a range of options, which we were free to choose between, most of which were identical to the funds I picked for my taxable account. I would agree that if someone is being told their only 401k option is a poorly managed fund with a bad mix of assets, that would not be ideal, but I don't know that to be common.
I was referring to difficulty accessing funds. There's a huge disincentive of withdrawal before 591/2, even when your account is losing in value. The con here is subjective to a large degree, though it would be an objective statement to say that the inability to touch your money for decades would hamper you from channeling it into different investments or even expenses. Some people like the idea of not having access to money (and not dealing with it) knowing it will go for retirement. Some people don't appreciate the lack of autonomy, and I fall in the second group.
As for choices, the number is actually decreasing
https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/number-of-401k-funds-offered-to-plan-participants-shrinks.aspx
I have two 401Ks. One has 26 and the other 23 choices of investments which is apparently more than the average. I do not consider this a wide array of choices. Both do not have cash nor MMF; though one has SVF. One is one of the largest employers in one of the biggest metros in the city, the other is a well known academic place.
Which specifically? The white coat investor discusses how large future tax increases would need to be in order to render a 401k a tax-disadvantaged plan. I think that any investment may be more or less attractive in the future based on unpredictable variables. Real estate perhaps more than any other. People buy cryptocurrencies which could all be banned in a few years. They may greatly increase capital gains tax on taxable accounts. Is there a reason to think that future variables are going to be disadvantageous to 401ks in particular?
Taxes is the big one. Why are people so confident taxes will be similar 30 years down the road. It's a foolish bet and the entire premise of tax deferral rest on that assumption. But I was also referring to unpredictable events with major changes on the economy (essentially the black swans). Stocks are also more vulnerable to these. The government also a big stake in those accounts since they have not been taxed yet, but rather "deferred". The comparison to the capital gains tax is a bit lousy. Yes, for all we know, the government can confiscate everything. But their stake is much bigger in accounts that have never been taxed and that additionally are already subject to a penalty for withdrawl, as opposed to a regular brokerage account where really only the gains have not been touched before.
I'm not sure why you think real estate is based on more than any other. Certainly less volatile than stocks not to mention that in addition of being an investment it has the potential of providing ongoing gains. Even if you're actually just living in that house. I think it's much smarter to save for your first home than to dump it into a 401K (and I regret doing that). Doctors have actually a huge advantage with that since they can get a house with no downpayment. Of course all forms of investments have a downside. The biggest downside is liquidity but 401ks with the withdrawal penalty aren't really liquid either. Real estate is also subject to catastrophe, but they tend to ride those better - and natural catastrophes are usually fairly predictable and insured against (floods, earthquakes, hurricanes) - though admittedly climate change is a big one (catastrophe across the board really). There's very little insurance on your retirement account.
Isn't market volatility a factor of asset mix rather than the nature of the account? Both taxable and non-taxable accounts that include stocks are exposed to market volatility. A 401k that is entirely bonds will not be exposed to market volatility. My own 401k is a 'target date account' which shifts the asset mix to bonds over time, I believe this is an incredibly common arrangement.
This is simply not true. Again, refer you to 2008.
These 401(k) funds took a beating in 2008 — and it could happen again
Even the most conservative blended arrangements got routed. If you happened to retire around that time, you got screwed.
Heck, even MMF crashed. I could refer you to an article in Time magazine about the 401K crash in 2008 and how badly it affected retirees around that time.
I have first hand experience with what a full blown economical collapse means (not in the US obviously). Sometimes the best place for your money is under the pillow - and that was almost the situation in 2008 anyhow.
The tax benefits are significant as money that a physician invests in a 401k would otherwise likely be taxed at the highest or second highest tax bracket, is allowed to grow without any tax on dividends, and when withdrawn will initially be untaxed for the first $20k or so, and then taxed at the lowest tax bracket and so forth (
Roth versus Tax-Deferred: The Critical Concept of Filling the Brackets | White Coat Investor). Given that physicians are likely to rely on a mix of taxable and non-taxable accounts, it is possible to sustain an improved lifestyle in retirement while paying much lower effective tax on your 401k distributions than you would have paid on this income in peak earning years.
We've been through this.
I would refer you to this:
Problems With 401(k) Plans and What You Can Do About Them
However, before accepting the premise that pre-tax investing is an investment advantage, keep in mind that when you withdraw your money from your 401(k) plan, the entire amount will be taxed at your personal income tax level.
This may be a disadvantage if your investment strategy achieves substantial long-term gains that could have been taxed at the lower capital gains tax rate level. Since these gains will be taxed as income under a 401(k) plan structure, your perceived pre-tax advantage on the front end will be offset to a certain degree by the tax disadvantage on the back end.
The effect is offset if you make big gains (say from an index fund that you've been building for decades). It is offset if the tax rate goes up (and entirely possible especially if you're getting big deductions while you were working and/or taxes go up. I posted that calculator above).
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Again, I'm not saying 401ks are bad or don't do them. Maybe they make sense in an employed doctor's situation. I am not telling anyone what to do or how to save money. For my specific situation, I think there are better options that are less subject to risk, offer more flexibility and may even get more returns. Since I do have the choice though, I would definitely prefer a Roth account. It's something I'm considering.