“Should I make a 401k?”
You might have asked yourself this question at some point. After all, a lot of employers offer it.
Simple answer: a 401k is a bad idea.
For those of you trying to live the financially independent lifestyle where you can travel the world indefinitely, like me, having your employer set aside a part of your income per paycheck into a 401k is a bad idea. Why?
Because the problem with 401k is that you get it when you’re 65.
Yes, the money will grow tax-free in your 401k because it’s invested in mutual funds, stocks, bonds, etc. And you might have a nice chunk of money when you retire at 65. But that’s the thing, WHEN YOU RETIRE AT 65.
You want access to your money NOW.
Let’s say you make a 401k and put money into it.
Then, as chance would have it, you’ve reached financial independence.
If you withdraw from a 401k early, you’ll have to pay taxes and penalties.
Therefore, what’s the point of making a 401k if you can’t use it to travel till you’re old?
Best to not make a 401k at all.
In regards to opening a 401k, let’s assume you’re in your 20’s when you start working and saving up money. That’s 45 years that you don’t have access to that money.
So if you’re working on reaching financial independence when you’re in your 30’s, wouldn’t you want your money when you reach it now? To use that money to travel NOW? To live NOW? Rather than when you’re 65?
This is why you shouldn’t make a 401k when your employer offers you one.
Instead, you should work toward saving up a million dollars in mutual funds and investments for ready access when you want to travel indefinitely.
Thank you for reading,
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