4 Reasons to Invest for Retirement Outside Your Company’s 401k

Reason #3: You Want To Contribute Post-Tax Income

The overwhelming majority of company 401k plans are funded with pre-tax dollars like a Traditional IRA. This means your taxable income is reduced now but your contributions will be taxed as you withdraw them after 40 years of appreciation. If you don’t want to be hit with a surprise tax bill when you live on a fixed income, a better option might be a Roth IRA that allows you to pay the income tax now instead of when you retire. More companies are beginning to offer Roth 401k plans, but you still have the same limited investment options at your traditional pre-tax 401k plan.