[Maestro]

Definitely different views on the subject.

I have been putting in the max % I could since I have been 21 and most all the companies I worked for matched at around 4%. If I keep this up and keep adjusting my investment strategy as needed I will be very well off when I retire. My wife has also been putting money in her 401K.

A number of people have brought up some good points which you have to consider. I call tell you in my case putting money in my 401K and my mortgage has reduced my tax liability. My overall affected federal taxes I have paid has been in the range of 12% to 19%, I never paid the max federal taxes due to my 401K. This is great assuming the taxes do not increase over time, which as it was pointed out they could.

Now here is the down side of 401K over a ROTH. You need to clear out your 401K by the particular age (I think it is 72 or 75) so that mean you will be drawing down your account far faster than it went in driving you to a higher tax bracket, since you most likely will not have a mortgage or other tax deduction at the time. The government know this, this why they limit a ROTH to $5k a years since there is no limit on when all the money must be out. Also, you can draw the principle out of the ROTH without touching the earning there by avoiding paying taxes longer until you start drawing on the earnings.

The government is hoping you do not live long enough to enjoy all the money in your 401K and you leave it to someone and they get hit with higher taxes.

Here is another benefit which I think states will eventually figure out but have not as far as I am aware. Some state do not tax 401K contribution and some do tax it. Calif does not tax it and lets you deduct it, however, Pennsylvania does tax it, of which I lived in both states. Now if you live in a state which does not tax the money going in, great, you live there while you work. When you retired move to a state which does tax the money go in, they do not tax any of the money coming out. In reality you are required to paid the state you lived in when the money was going in, however, I am not sure how they can come after you since you do not live in their state anymore.

For those of you who are not maxing out their 401Ks and may or may not being putting money into a ROTH, what other investment strategies are you doing. I too have a person investment account which I trade in from time to time, but I am careful about racking up too much capital gains.