HYSA vs. 401k

[Anonymous]

Curious if anyone is putting more savings aside for retirement into a high yield savings account vs their 401k?

With uncertain markets, this seems like it could be a smart choice for those who are more risk adverse. HYSA APYs are around 4%, and though they are variable and can dip, you don’t lose money the way you can on traditional investments. Plus you can pull money out if needed sans penalty.

Anyone doing this as a strategy? And drawbacks?

[Anonymous]

A couple of obvious points: (1) markets will always be uncertain, and (2) 401ks are not just for investing in equity funds!

You should look at the investment options for your 401k. There are surely tons of very, very low-risk options, including money market funds. If you are currently investing in a target-date fund, you may be surprised how much you are already allocating to bond funds.

HYSAs are taxable. So if your marginal tax rate (including fed, state, local) is 40%, and you get a 4% return, you will pay 1.6% in taxes and keep 2.4%.

With the traditional 401k, you will still eventually pay taxes on those gains, but it will be much later, presumably at a lower marginal rate in retirement.

[Anonymous]

All this money should be in Roth. I see risk in:
not taking advantage of tax free growth forever
not learning to invest on your own for which Roth is great
Roth which is easy to inherit (hysa and 401k were painful to inherit)
HYSA loses money in terms of purchasing power as they print more money, so why even bother.
401k has too many fees, taxes, rules, RMD, and lousy customer service among other things.
You need to be in hard assets as they print more money.
You should be investing, not saving.
What you are doing is risky. Stocks are marching ahead, because they got to include the money being printed out of thin air, and that's where some of the money will go.

[Anonymous]

At the very least, buy MMs in a 401k. You get the money in pre/tax and don’t pay tax on the earnings…and most MMs pay like 0.25% higher.

Better yet, buy treasuries so you lock in day 4.5% and it won’t chain when interest rates are lower.

[Anonymous]

401k matches. Kinda silly idea OP

[Anonymous]

OP, you should also consider taxes in your decision. The money you would normally put in 401k (pre tax) will now be taxed at your income tax rate before you can put it other post tax savings (HYSA, Roth etc). If you are in a higher tax bracket, that may not make sense for you.

[Anonymous]

No it’s literally excluded from income. That’s a return of 40% right there. Don’t save anywhere else until you put the max in your 401k.

[Anonymous]

Anonymous wrote:All this money should be in Roth. I see risk in:
not taking advantage of tax free growth forever
not learning to invest on your own for which Roth is great
Roth which is easy to inherit (hysa and 401k were painful to inherit)
HYSA loses money in terms of purchasing power as they print more money, so why even bother.
401k has too many fees, taxes, rules, RMD, and lousy customer service among other things.
You need to be in hard assets as they print more money.
You should be investing, not saving.
What you are doing is risky. Stocks are marching ahead, because they got to include the money being printed out of thin air, and that's where some of the money will go.

All this talk of Roths. We haven't been eligible to contribute to a Roth for the last 20 years because of income being too high. How many people in the DMV are? Isn't the limit for a married filed jointly couple something like $240K? And neither of our employers offers the back-door option.

Or am I missing something?

[Anonymous]

Anonymous wrote:

Anonymous wrote:All this money should be in Roth. I see risk in:
not taking advantage of tax free growth forever
not learning to invest on your own for which Roth is great
Roth which is easy to inherit (hysa and 401k were painful to inherit)
HYSA loses money in terms of purchasing power as they print more money, so why even bother.
401k has too many fees, taxes, rules, RMD, and lousy customer service among other things.
You need to be in hard assets as they print more money.
You should be investing, not saving.
What you are doing is risky. Stocks are marching ahead, because they got to include the money being printed out of thin air, and that's where some of the money will go.

All this talk of Roths. We haven't been eligible to contribute to a Roth for the last 20 years because of income being too high. How many people in the DMV are? Isn't the limit for a married filed jointly couple something like $240K? And neither of our employers offers the back-door option.

Or am I missing something?

You are missing backdoor Roth contribution

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:All this money should be in Roth. I see risk in:
not taking advantage of tax free growth forever
not learning to invest on your own for which Roth is great
Roth which is easy to inherit (hysa and 401k were painful to inherit)
HYSA loses money in terms of purchasing power as they print more money, so why even bother.
401k has too many fees, taxes, rules, RMD, and lousy customer service among other things.
You need to be in hard assets as they print more money.
You should be investing, not saving.
What you are doing is risky. Stocks are marching ahead, because they got to include the money being printed out of thin air, and that's where some of the money will go.

All this talk of Roths. We haven't been eligible to contribute to a Roth for the last 20 years because of income being too high. How many people in the DMV are? Isn't the limit for a married filed jointly couple something like $240K? And neither of our employers offers the back-door option.

Or am I missing something?

Did you see where I said that "neither of our employers offers the back-door option"?

You are missing backdoor Roth contribution

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:All this money should be in Roth. I see risk in:
not taking advantage of tax free growth forever
not learning to invest on your own for which Roth is great
Roth which is easy to inherit (hysa and 401k were painful to inherit)
HYSA loses money in terms of purchasing power as they print more money, so why even bother.
401k has too many fees, taxes, rules, RMD, and lousy customer service among other things.
You need to be in hard assets as they print more money.
You should be investing, not saving.
What you are doing is risky. Stocks are marching ahead, because they got to include the money being printed out of thin air, and that's where some of the money will go.

All this talk of Roths. We haven't been eligible to contribute to a Roth for the last 20 years because of income being too high. How many people in the DMV are? Isn't the limit for a married filed jointly couple something like $240K? And neither of our employers offers the back-door option.

Or am I missing something?

Did you see where I said that "neither of our employers offers the back-door option"?

You are missing backdoor Roth contribution

You do it yourself. Not employer dependent.

[Anonymous]

Anonymous wrote:

Anonymous wrote:All this money should be in Roth. I see risk in:
not taking advantage of tax free growth forever
not learning to invest on your own for which Roth is great
Roth which is easy to inherit (hysa and 401k were painful to inherit)
HYSA loses money in terms of purchasing power as they print more money, so why even bother.
401k has too many fees, taxes, rules, RMD, and lousy customer service among other things.
You need to be in hard assets as they print more money.
You should be investing, not saving.
What you are doing is risky. Stocks are marching ahead, because they got to include the money being printed out of thin air, and that's where some of the money will go.

All this talk of Roths. We haven't been eligible to contribute to a Roth for the last 20 years because of income being too high. How many people in the DMV are? Isn't the limit for a married filed jointly couple something like $240K? And neither of our employers offers the back-door option.

Or am I missing something?

Some employers do offer Roth options. At mine you can choose to contribute to either regular or Roth 401k. Also, you can do the back-door option on your own by contributing after tax to a regular IRA and then immediately converting. Yes, it’s dumb, but those are the rules.

[Anonymous]

Anonymous wrote:

Anonymous wrote:All this money should be in Roth. I see risk in:
not taking advantage of tax free growth forever
not learning to invest on your own for which Roth is great
Roth which is easy to inherit (hysa and 401k were painful to inherit)
HYSA loses money in terms of purchasing power as they print more money, so why even bother.
401k has too many fees, taxes, rules, RMD, and lousy customer service among other things.
You need to be in hard assets as they print more money.
You should be investing, not saving.
What you are doing is risky. Stocks are marching ahead, because they got to include the money being printed out of thin air, and that's where some of the money will go.

All this talk of Roths. We haven't been eligible to contribute to a Roth for the last 20 years because of income being too high. How many people in the DMV are? Isn't the limit for a married filed jointly couple something like $240K? And neither of our employers offers the back-door option.

Or am I missing something?

Oof, you have missed 20 years of IRA --> individual back door Roth conversions, times 2 for you and your spouse.

[Anonymous]

How can you do a backdoor Roth if you have an existing traditional IRA that was a roll over from prior employers 401k?

[Anonymous]

Anonymous wrote:How can you do a backdoor Roth if you have an existing traditional IRA that was a roll over from prior employers 401k?

You would have to either roll the traditional IRA into a 401k (some plans allow this), which will have no taxes, or convert the IRA to Roth, in which case you will pay taxes. There are calculators online that let you estimate whether paying taxes on the Roth conversion is worth it given opening up the backdoor Roth.