Say you contribute 10k 401k, employer matches 5k, you mow have 15k balance Assume tax rate is 30% If you don’t contribute to 401k at all, you get 7k Now, even if you withdraw 401k early, you still get 15k * 0.7 * 0.9 = 9450 (if you move to Seattle it’s even more) The problem is make sure you don’t contribute beyond employer match limit. Am I right or missing sth?
Confused on the “you get 7k” part Where did that come from?
10k * 0.7 =7k
Assuming that your employer will match that much I guess I follow your logic. But why not just leave the money there?
Yes, you have more than if you didn't contribute. But you have less than if you left it there. So, not worth it, unless there is no better option.
You pay a 10% penalty
Add the 10% penalty to the calculation. I mean yes you still will end up with more cash.
Why not leave it there? If you need to tap into 401k for a big purchase, you need to reevaluate if you can afford it. If you withdraw early, it also breaks your compounding. The key to growing investments is to keep it invested for a long long time.
You are ignoring the 401K returns , it could be either more or less based on the market condition. But , yes, the norm is contributing at least what employer matches , result in gain even if you withdraw early.
You can borrow instead of withdraw. Imo, if you plan to retire in the US, contribute at least what the company will match. Increase it as you can to the max.
Taxes too f
Already considered in calc