Saving for retirement is important, but where you save your money can be just as important as how much you save. While maximizing retirement account contributions offers valuable tax benefits, maintaining assets outside of those accounts can provide greater flexibility and additional planning opportunities.
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Austin, is it possible to have too much saved into a 401(k) or an IRA versus other options?
We certainly recommend that our clients maximize their deductible contributions. However, at the same time, we don’t want them to have all of their assets saved up into something that’s fully taxable in retirement.
And, ironically, one of the unsung heroes in financial planning is a taxable account. And that taxable account can provide tremendous flexibility and planning opportunities and allow our clients to be able to look at Roth conversions, charitable bunching, as well as managing their tax liabilities in retirement.
But the other thing it can also do that I think is important is allow them to be able to buy a cabin or even retire earlier and not feel like they’re locked up until 59 and a half.
So, it’s just as important to diversify where you save your money as it is what you invest in.
We think so.